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Adding an escalation clause to your offer is one strategy that you can use when competing with another bidder. The Escalation Clause. Real estate offers are a closed bidding process, so most often you will know little to nothing about the price and terms being offered by the other parties. Using escalation clauses surprisingly is not as common as you think. Especially since it can almost guarantee a win on your home offer.

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An example will make the concept clearer. Say you find the home of your dreams at a crowded open house. You know the next day’s offer deadline will likely have multiple bidders. An escalation clause, sometimes referred to simply as an escalator, is a real estate contract signed by the buyer that lets the seller know that they’re willing to increase their offer if the seller gets a higher bid than theirs. The basic components of an escalation clause are: Escalation Clauses What is an escalation clause? An escalation clause (also called a relative bid or "sharp" bid) is a provision added to an offer or counter offer where the buyer offers "X dollars more" than the next highest offer.

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Simply put, an escalation clause in a real estate offer lets a home seller automatically increase a buyer’s bid in the event the seller receives another offer that’s higher. The buyer is giving the seller permission upfront to increase their offer without further consulting with the buyer.
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The purpose is to beat out the competition. When the seller receives a higher offer than yours (as the buyer), the escalation clause goes into effect. 2020-07-22 · Escalation Clauses in a Real Estate Market. What is an Escalation Clause and how do they work?