It doesn’t matter if it’s a sellers’ market or one that’s more in favor of buyers; if a house is desirable and priced appropriately, the chances are you’re going to find yourself in a bidding war. Makes sense, right? If you love the house, most likely other buyers in the market will as well. So, not only do you have to act fast, but you need to pull out all the stops in order to get your offer accepted.

But that doesn’t mean you want to offer more than you have to in order to get the house! It’d be nice to be able to submit an aggressive offer that’ll beat out every other offer, yet not go more than a few bucks higher than the next highest offer, right? Well, you can pull that off with the use of what is known as an escalation clause.

Simply put, an escalation clause allows you to submit an initial lower offer, which will automatically increase in specific increments above any other offer that comes in, up to a certain capped amount you set.

For instance, if you made an offer of $300,000, and another offer came in at $310,000, if you had an escalation clause that said to offer $1,000 over any higher bid, your offer would go to $311,000. If nobody offered higher, your bid would effectively be the highest. But let’s say you capped it at $315,000. Your offer would continue to increase until someone exceeded that amount — but wouldn’t go higher — protecting you from paying more than you wanted to.

That said, while escalation clauses can be useful in helping you win a multiple offer situation, they can also cost you the house. So, let’s look at the pros and cons to using one, so you can decide if it’s the right decision for you:Continue Reading