What is an Escalation Clause? Should you use it in your Atlanta home buying strategy?

Wondering what an Escalation Clause is? Why serious home buyers need to include this in their bid / offer on houses If you are buying a house in this competitive market, you’ll need to be prepared to pay above asking price for the home in most cases.

One term that is often heard is the importance of an escalation clause. As the real estate term sounds, it makes sure that if you are outbid by another offer, you can go higher by bidding higher in increments through your realtor.

Think of and escalation clause like bidding on an item on ebay. You put in an offer and then you are asked to put in a maxiumum offer. This is in case someone come and outbids you. Ebay bids on your behalf in increments until you max offer is exhausted. That's how an escalation clause works. As other home offers come in on a house you have submitted an offer, your escaaltion is added in increments that make sense (think $1000 or $2000) depending on the market and what makes sense. 

It's important to know you max value for an escalation clause. When does it make sense to bow out and look for another house? Remember that just because there is a bidding war and the price is going up for a home because of an escalation clause, that doesn't mean it is going to appraise for that much. So, you will be responsible for paying the seller out of pocket the additional funds that are beyond the appraisal. 

Watch our video on Escalation Clause explained below to learn more about how this process works. 

In this video we will attempt to answer the questions:

How does the escalation clause work?

What are the risks to the buyer with an escalation clause?

How far above the asking price should you go with an escalation clause?

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Here are a great resources to help you if you are considering moving in the near future: *Search for homes on our website → https://www.brucebo.com/new-construction *Get an estimate of your home's value → https:://brucebo.com/evaluation.

We hope this has helped you understand the purpose of the Escalation clause and why you need to be careful when adding such a clause. If you have further questions about an escalation clause or what it means, check with us. Bruce@brucebo.com or 678-761-5803.