Is an Escalation Clause Effective When Buying a Home?

In the current real estate market in San Diego it may be necessary to use tools such as an escalation clause to get the home for sale in San Diego that you are looking for. Find out if an escalation clause can help you when buying a home.

Many buyers are encountering competitive offers when attempting to purchase a San Diego home for sale. As a result of the current market conditions some buyers have taken to drafting personal letters to sellers or eliminating contingencies in order to secure the home they want.

An escalation clause may be a more appropriate tool to utilize for the current market than the aforementioned methods.

An escalation clause is essentially a contract between the buyer and seller that presents an initial offer, but in the event of a competing offer above that amount that they are willing to increase the amount of the offer in increments up to a specified amount. Think the real estate equivalent of setting a reserve price on Ebay.

The primary benefit of an escalation clause is being able to compete effectively in the event that a home is likely to receive multiple offers. There are also several liabilities to employing an escalation clause. One issue is that you are telling the seller exactly how high you are willing to go on the price of the home and can cost negotiating power and money. Additionally, sellers may not accept an escalation clause as eliminating this tool can have the potential of motivating buyers to bid higher on the first offer.

A San Diego Realtor will be able to tell when utilizing an escalation clause will be most effective and when other methods are best.

By Linda Moore

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