As a first-time homebuyer, you may have experienced the frustration of losing out on your dream home. You made an offer, but someone else’s bid was accepted. You find another perfect house, put in an offer, and once again, the seller chooses someone else.
This cycle can feel disheartening, but there’s a solution to break it: the escalation clause. This powerful tool can help boost your offer and increase your chances of securing the home you’ve set your sights on.
What Is an Escalation Clause?
An escalation clause is an addendum you can add to your offer, specifically designed to automatically increase your bid if there are competing offers. This clause can help you stay in the running without having to guess how much more you need to bid.
How It Works
Here’s a simple example of how an escalation clause can work:
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Initial Offer: You submit an offer of $250k for a property.
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Other Offers: You discover there are other competing offers on the table.
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Escalation Clause: Instead of submitting a higher offer outright, you set your maximum price (say $280k) and indicate you’re willing to increase your offer by a specific amount (e.g., $1,200) above any competing offer, up to your maximum of $280k.
This approach can keep you competitive in a bidding war without overpaying. If your offer is accepted, you only pay a little more than the next highest bid, not necessarily your maximum.
Can an Escalation Clause Backfire?
Escalation clauses are generally safe, but they come with the potential risk of paying more than necessary. To avoid this, only use an escalation clause when you know there are other written offers already on the table. It’s also important to ensure that the seller’s agent notifies you when other offers are received.
Pre-Event Offers: An Alternative to Escalation Clauses
In the competitive world of real estate, there are alternatives to escalation clauses. For example, placing a pre-event offer in a home auction is similar to using an escalation clause. Through TheAssetGrowth, you can submit an offer before the auction even starts. If your offer is accepted, you won’t have to wait for the auction event itself to purchase the home. Similar to an escalation clause, you can increase your offer in incremental amounts, giving you more flexibility.
Whether it’s a traditional property or an auction event, using an escalation clause—or submitting a pre-event offer—can help you stand out in a competitive market.
Ready to take the next step toward homeownership? Explore incredible properties on TheAssetGrowth today and take control of your home-buying journey!