how to write an escalation clause in real estate
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What is an escalation clause in a real estate offer?
If the seller receives a competing offer of $300,000, the escalation clause would increase the first offer to $302,000. Offers with an escalation provision generally establish a floor, or minimum offer price. A higher competing offer then triggers the escalation clause, increasing the original offer.
What is the ethics of the escalation clause?
Ethics of the Escalation Clause 3. Benefits and Drawbacks of Escalation Clauses An escalation clause is used in buyers’ offers for real estate to improve the buyer’s chances of succeeding against competitors’ offers.
How much can you offer on a house with an escalation?
For example, you may offer $300,000 on a home with an escalation clause stating that you will outbid other offers by $5,000 up to $321,000. So if another buyer makes an offer of $305,000, your escalation clause means that you will pay $310,000 for the home.
Should you add an escalator to your real estate offer?
An escalator can do just that. With an abundance of real estate transactions containing escalation clauses, it is clearly a useful tool in a hot market. However, it should be made abundantly clear up front that you or your agent better know what they are doing when adding an escalation clause in an offer.