When making an offer on a home, you want to stay under the maximum amount you’re willing to pay but high enough to outbid other sellers. You might also want a way to track other offers so that you can continuously outbid them to increase your chances of making the deal. This is what an escalation clause does, which is an extremely effective tactic in the right situation.
What is an escalation clause in a contract?
An escalation clause is an addendum submitted in a multiple-offer situation to improve the odds that you will outbid other buyers.
For example, you might make an offer on a property for $325,000, but you can include an escalation clause that states you are willing to pay a maximum of $335,000 if a bidding war begins.
The clause also states that your offer will increase in set intervals to counter other offers up to the max offer, or escalation cap. [Read more…]