Can an Escalation Clause Always Be Used?
An escalation clause can be very useful in some situations, but in many it is not entirely necessary or accepted. This can be due to a variety of different factors. Evaluate your specific situation and determine if an inserting this clause would benefit you.
Seller Must Accept Escalation Clause
Many sellers outright state that they will not accept an offer with an escalation clause. They would prefer their interested buyers to submit the highest offer they are willing to pay from the start. This motivates buyers to put forth their highest offer immediately. This method also greatly streamlines the paperwork and decision making process. Due to the fact there is no contingency to refer back to every time an offer is made.
Multiple Offers
Sellers are not the only ones that could potentially lose money when an escalation clause is in place though. When you insert this clause into your contract you are outright saying how high of an offer you are willing to make on a house. This can then be used against you later in the process of buying the house, if no one submits a competing offer. If a competing offer is not submitted, the agent of the seller will advise them to ask for the highest offer you were willing to make outlined in the escalation clause.
While you do not have to agree to this higher price, you most likely will if you want to own the house. Therefore you should only include an escalation clause if you are confident that competing offers will be submitted on the house. As well as being prepared for the highest offer, or purchasing price of the home to escalate anyway.
