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offer strategies

What is an Escalation Clause?

In this market, buyers are wising up to ways they can make their offer stand out above the rest. One strategy? Including an escalation clause.⁣
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What is an escalation clause? Let me explain.⁣
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An escalation clause automatically increases a buyer’s offer by a certain amount, for example $2,000, each time another buyer makes a higher bid up to a predefined cap (set by the buyer). It essentially eliminates the back and forth of offers and counteroffers.⁣
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This is a common practice in this current market where so many buyers are competing for the same property. Is it always the best strategy?? Not always! Make sure that you hire a Realtor that has a lot of experience competing in this market. They will be able to guide you to which negotiating strategy is the best for your scenario!

Looking for more ways to write a competitive offer? See my article on Tips for Winning in a Bidding War.

Tips For Winning in a Bidding War

  • Have your pre-approval letter or proof of funds in hand. You may have a great offer to submit, but if you can’t back it up with proof you are qualified to purchase the home the seller may just move on.
  • Make a cash offer if you are able. If not, make as large a down payment as possible, and use a lender that communicates effectively with all parties.
  • Offer more than the asking price. Your agent should do a comparative market analysis to give you a good idea on the home value as soon as you decide to make an offer. If it’s not too out of line with the CMA or your budget, offer more than the asking price.
  • Keep your offer clean and simple. Don’t ask for contingencies that aren’t necessary to closing the transaction.
  • Shorten the inspection period. Asking for a 5 to 7 day inspection period instead of the traditional 10 lets the seller know that you aren’t going to waste anyone’s time. Find a home inspector who has availability to schedule your inspection as soon as your offer is accepted. 
  • Have your earnest deposit ready. Offer an escrow deposit that sends the message that you are serious about your offer and have the funds ready to turn in as soon as your offer is accepted. You may want to include a copy of your escrow check with your offer. 
  • Offer flexibility with your closing date. Convey through your agent that you are willing adjust the closing date to suit the seller’s needs.
  • Consider an escalation clause. Let the seller know your offer isn’t the highest you will go by including a clause stating that you will increase your offer, up to a set price, if the seller shows you a higher offer from another buyer. 
  • Offer an appraisal gap guarantee. If you have the funds available, this is a great way to lessen the risk of an appraisal falling short of the price that you have agreed to pay for the home. The seller will be more comfortable taking your offer knowing that you are willing to make up the difference if the appraisal comes in lower.
  • Be diplomatic with negotiations after your contract is signed. Remember that the seller has other interested parties to fall back on. If you turn ugly after the contract is signed, making additional demands or not following through with your promises, the seller may hand you back your deposit and work with someone else.

I’m happy to discuss these ways and others that I have used with my clients when winning in bidding wars. Message me today to schedule a consultation or click on this link to see what times I have available!