Chicago’s Spring 2016 Housing Market has been 1 of the busiest I’ve ever been a part of. With aggressive buyers watching the market daily and pouncing on the best homes, any buyer should expect that they will be in a competitive bidding situation at least once.
This has given rise to the usage of escalation clauses on offers. An escalation clause is an addendum to a buyer’s purchase offer, and stipulates that a buyer will pay a higher price than other competing offers, up to a certain price point. For example, a buyer of mine recently won a multiple offer by writing that they would pay $1,000 above the next highest offer, up to a set purchase price. The strategy worked and they got the house for $4,000 less than the price they would have paid.
There is some discord in the industry about the use of an escalation clause. Brokers and sellers alike sometimes feel they aren’t fair, or pose the question “If the buyer can buy to X price, why don’t they just pay that?” If you are writing an offer and considering using an escalation clause, be smart about it – ask the seller or listing realtor if it’s something the owner would be open to. If they aren’t, just go to your highest and best number during the negotiation. Remember…you are trying to win the seller’s affection.
Lean on your buyer’s broker for their best advice on whether or not to use the escalation clause in your offer!