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Offered by Jan Hepp-Struck, Hepp Realty

Purchasing a home in today’s ultra competitive home buying market where properties routinely receive multiple offers is stressful. There is a tool called an Escalation Clause that can make a difference in ensuring you don’t get outbid. But like all things, it has its pros and cons, and doesn’t come without a certain amount of risk to both buyer and seller.

An Escalation Clause is a strategic addendum typically added to a real-estate contract with an initial offer. It basically states that as the buyer “you will pay X dollars for this house, but if another buyer submits a verifiable bid that’s higher, you will raise your offer in increments of Y dollars to a maximum price of Z.” This method can save a lot of time in back and forth negotiations, but there are most definitely things to consider before using one, and it’s best to have a realtor who understands the ins and outs of real estate contracts before using one!

Before using an escalation clause, be sure to consider the fact that you may need additional cash towards a larger down payment, as well as the fact that the escalated price might not match the appraisal, and also affect the type of mortgage available to you as a buyer.

Before adding an escalation clause to your offer, you and your broker should discuss it with the seller’s real estate Broker because some sellers do not like them, and it could affect whether the seller will even consider your offer. Additionally, make sure any documentation you are asking the seller to provide for proof of higher bids is fully specified in the offer.

For proven expertise in buying or selling a home, call Jan at 303. 520.4340

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