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Word-of-The-Day: Escalation Clause

  • An escalation clause is legal jargon a buyer can put in an offer that states that the buyer will outbid other offers on a home up to a certain price point.
  • Escalation clauses are more common in seller’s markets. Escalators are designed to help a buyer win a bidding war which becomes quite common in hot real estate markets.
  • While an escalation clause can be useful for the buyer, some sellers may find the addition of such a clause confusing. The seller may wonder why the buyer did not offer more if he or she was willing to pay the ceiling amount for a home. With an escalation clause, it becomes important that the listing agent understand them – many do not.

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