• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Accessibility Statement

Follow Us on FacebookFollow Us on TwitterFollow Us on InstagramFollow Us on YouTubeRSS Feed

Kimberly Howell Properties

San Antonio Real Estate

office@kimberlyhowell.com
(210) 493-6888
  • Blog
  • About Us
  • Agents
  • Buyers
    • Neighborhoods
    • Relocation Information
  • Sellers
  • Listings
    • Available Rentals
    • Homes for Sale
    • McNair Custom Homes
    • Open Houses
  • Contact
  • Rental SearchHomes for Rent
  • REALTORS®Find an Agent
  • McNair Custom HomesNew Construction
  • Property SearchHomes for Sale
You are here: Home / Archives for escalation clause

escalation clause

What is an escalation clause? Should I use one?

May 14, 2014 by khproperties 3 Comments

Escalator

Understanding an Escalation Clause

An escalation clause is phrasing in a contract that is sometimes used to strengthen a buyer’s position in a multiple offer situation. The basic idea is that the buyer offers to pay a certain amount more than their current offer if there are multiple offers. Often, when we see them, the escalation clause states something along the lines of “buyer will pay $1,000 more than the highest offer if other offers are present.” Obviously, wording may vary, but we see similar wording to this and it’s important to note (as we will explain below).

Escalation clauses are used to shore up an offer by the buyer and try to guarantee that the seller will pick their offer over all others. By putting a monetary figure in there, the buyer is essentially making their offer look better than all others, because they are willing to pay more than anyone else.

The Dangerous Game of an Escalation Clause

While it may seem like a good move to secure the buyer their dream home, an escalation clause has a dangerous side to it that many don’t consider. By agreeing to pay an amount higher than other offers, the buyer is locking themselves into a potential disaster. What if the seller suddenly gets an offer that is $10,000, $20,000, $100,000 more than the buyer’s original offer price? Now the buyer is on the hook for their offer price, plus the other offer’s increase in price, and whatever amount they used in their escalation clause (in our example above, $1,000). That’s a lot of money. Hopefully the buyer elected to have an option period so that they could terminate the contract if they don’t want to spend that much. We’ve even heard of cases where offers were made by friends of the seller in order to bump up the price, even though the friends making the offer have absolutely no intention of buying the home.

The other danger in escalation clauses, is the unlicensed practice of law. In Texas, real estate agents are forbidden from practicing law without a license and the wording of these clauses can be construed as practicing law. This can land an agent in a lot of hot water with the Texas Real Estate Commission. The Texas Association of REALTORS® has even made a video about it so that agents don’t forget.

If you are a buyer and find yourself in a multiple offer situation, the best way to deal with it is to make what we call “your highest and best” offer. It will keep you from being pushed to a higher price than you might be ready for and it will keep your agent from breaking the law.

image courtesy of Nick Harris1

Filed Under: Buying a Home Tagged With: law, contracts, escalation clause

Primary Sidebar

First Time Homebuyers

Financial Fundamentals for First Time Homebuyers

Are you prepping to buy your first home? If so, one of the steps you should take early on is making sure you’re financially ready for your purchase. Here are just a few of the financial fundamentals you’ll need … [Read More...] about Financial Fundamentals for First Time Homebuyers

Recessions

What Past Recessions Tell Us About the Housing Market

It doesn’t matter if you’re someone who closely follows the economy or not, chances are you’ve heard whispers of an upcoming recession. Economic conditions are determined by a broad range of factors, so rather … [Read More...] about What Past Recessions Tell Us About the Housing Market

McNair Custom Homes Video

Recently, we had the pleasure of working with McNair Custom Homes and The IMG Studio to put together a video about McNair Custom Homes and their building philosophy. We love the way it turned out. We hope you … [Read More...] about McNair Custom Homes Video

Confused About The Housing Market?

Confused About The Housing Market? Lean On Your Realtor

If you’re thinking about buying or selling a home, you probably want to know what’s really happening with home prices, mortgage rates, housing supply, and more. That’s not an easy task considering how … [Read More...] about Confused About The Housing Market? Lean On Your Realtor

Homeownership Is An Investment In Your Future

Homeownership: An Investment In Your Future

There are many people thinking about buying a home, but with everything affecting the economy, some are wondering if it’s a smart decision to buy now or if it makes more sense to wait it out. As Bob Broeksmit, … [Read More...] about Homeownership: An Investment In Your Future

Search Our Site

Real Estate Topics

  • Buying a Home
  • Homeowner Tips
  • KHP News
  • Local Events
  • Local Laws
  • Miscellaneous
  • Mortgages and Financing
  • Open Houses
  • Real Estate
  • Real Estate Market
  • Renters and Landlords
  • San Antonio Places
  • Sell Your Home
  • Technology
Our real estate agents can help you with properties anywhere in Texas. If you need assistance finding agents in other parts of the country, please contact us.

Search Homes

Explore Cities

  • Alamo Heights 34 Listings
  • Bandera 384 Listings
  • Blanco 192 Listings
  • Boerne 695 Listings
  • Bulverde 428 Listings
  • Canyon Lake 474 Listings
  • Castle Hills 24 Listings
  • Castroville 95 Listings
  • Cibolo 364 Listings
  • Comfort 59 Listings
  • Converse 677 Listings
  • Fair Oaks Ranch 53 Listings
  • Floresville 240 Listings
  • Garden Ridge 10 Listings
  • Helotes 145 Listings
  • Hill Country Village 1 Listings
  • La Vernia 180 Listings
  • Lakehills 139 Listings
  • Leon Valley 20 Listings
  • Live Oak 85 Listings
  • Mico 120 Listings
  • New Braunfels 1566 Listings
  • Olmos Park 9 Listings
  • San Antonio 10856 Listings
  • Schertz 301 Listings
  • Seguin 653 Listings
  • Selma 71 Listings
  • Shavano Park 14 Listings
  • Spring Branch 432 Listings
  • Terrell Hills 17 Listings
  • Universal City 99 Listings
  • Windcrest 29 Listings
  • Hollywood Pk 2 Listings

Stay up to date with the latest from Kimberly Howell Properties.

San Antonio real estate and property information provided by Kimberly Howell Properties. Kimberly Howell Properties does not assume any liability or responsibility for the operation or content of any of the linked resources, nor for any of the interpretations, comments, graphics, or opinions contained therein. All information deemed reliable, but not guaranteed.

KJH Properties, Inc. is a licensed real estate brokerage in the State of Texas, Equal Opportunity Employer, and supporter of the Fair Housing Act.

TREC Information About Brokerage Services | TREC Consumer Protection Notice | Privacy Policy

All content © 2009-2023 Kimberly Howell Properties, unless otherwise noted.