• 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

Open Floorplan

Is An Open Floorplan The Right Style For You?

Open floorplan living is often billed as the perfect floor plan, bringing family together in a single room where cooking, conversation and the screen share the same space. It has been a popular feature of a … [Read More...] about Is An Open Floorplan The Right Style For You?

New Kitchen

Nine Mistakes To Avoid With A New Kitchen

No room carries more influence with a buyer than the kitchen because it’s where the everyone gathers and many memories are made. The kitchen can represent up to 20% of the entire value of a property, so it’s … [Read More...] about Nine Mistakes To Avoid With A New Kitchen

House Fire Safety

9 Ways To Avoid Housefires

A fire in your home can happen at any time of the year, but with colder months upon us it’s easy to see how the danger increases with the setting of wood-burning heaters and the use of candles to create a cozy … [Read More...] about 9 Ways To Avoid Housefires

Call A Plumber

Is It Time To Call A Plumber?

As a homeowner, you’ll inevitably have to call in a Sydney plumber to deal with plumbing problems at some stage. It’s one of the ‘pleasures’ of owning property! Choosing the right contractor can feel a little … [Read More...] about Is It Time To Call A Plumber?

First Time Homebuyer

8 Tips For First Time Homebuyers

Being a first time homebuyer can feel quite intimidating – you’ve got to deal with agents, sellers, rival buyers, banks, and title companies. And it’s not always clear what role each of them plays in the … [Read More...] about 8 Tips For First Time Homebuyers

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 27 Listings
  • Bandera 383 Listings
  • Blanco 157 Listings
  • Boerne 608 Listings
  • Bulverde 310 Listings
  • Canyon Lake 365 Listings
  • Castle Hills 20 Listings
  • Castroville 78 Listings
  • Cibolo 351 Listings
  • Comfort 56 Listings
  • Converse 552 Listings
  • Fair Oaks Ranch 67 Listings
  • Floresville 270 Listings
  • Garden Ridge 24 Listings
  • Helotes 201 Listings
  • Hill Country Village 3 Listings
  • La Vernia 181 Listings
  • Lakehills 119 Listings
  • Leon Valley 24 Listings
  • Live Oak 56 Listings
  • Mico 117 Listings
  • New Braunfels 1311 Listings
  • Olmos Park 5 Listings
  • San Antonio 9513 Listings
  • Schertz 270 Listings
  • Seguin 611 Listings
  • Selma 58 Listings
  • Shavano Park 14 Listings
  • Spring Branch 360 Listings
  • Terrell Hills 25 Listings
  • Universal City 71 Listings
  • Windcrest 30 Listings
  • Hollywood Pk 5 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 © 2009-2020 Kimberly Howell Properties, unless otherwise noted.