How Buyers Can Use Escalation Clauses To Win

By Jorge Gonzalez

Jorge has been selling, managing and investing in both residential and commercial real estate since 1986 and has worked with Buyers and Sellers to navigate them through hundreds of transactions.

There’s no doubt about it—if you’re a homebuyer in today’s market, the competition is fierce. However, that’s no reason to be discouraged! Today I’ll share a tool my team uses to help buyers succeed against the odds and purchase the home of their dreams.

The tool is called an escalation addendum, which is a portion of the contract that automatically increases your offer price to exceed that of a competitor by an amount you set. This will continue up to a cap amount that you also control. With this tool, instead of shooting for some number in the beginning that you think will make you the highest bidder, you can incrementally boost your offer throughout the bidding process.

For example, suppose you’re competing with other buyers for a house you want. You can use the escalation clause of your contract to increase your offer by, say, $1,000 over the next highest bidder. As stated before, you can also set a cap to the amount you’re willing to offer. If the top of your budget is $500,000 and another bidder offers $500,000, the escalation clause won’t cause you to exceed your budget in the name of competition. If that does occur, the other bidder will likely win, but at least you can walk away from the negotiation feeling like you gave it your all without moving into an uncomfortable price range.

If you have any questions about this strategy or need help using it, don’t hesitate to give me a call or send me an email. I look forward to hearing from you.