Escalation clause
A clause in an offer that automatically raises the buyer's price by a set amount above any competing offer, up to a cap. Common in fast markets. Sellers sometimes ask for proof of the competing offer.
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See how it worksWhere this comes up in a sale, and what follows
- Host showings and open houses (comes before)
Part 1 of 4
Why a seller cares
It is a buyer's way of bidding without knowing the other bids, and it tells you exactly how high they will go. The cap is their real number; the offer price is the opening.
Part 2 of 4
A simple example
An offer at $300,000 with an escalation of $2,000 over any competing offer, capped at $315,000. A second offer arrives at $308,000.
| The competing offer | What the escalating offer becomes |
|---|---|
| $308,000 | $310,000, and the buyer usually asks to see the $308,000 offer |
| $314,000 | $315,000, the cap; the clause stops there |
| $320,000 | Nothing changes; the escalating buyer is capped below it |
The escalation price is set by the other offers, and the cap is the only number the buyer chose.
Part 3 of 4
What people get wrong
That the cap is what you get. You get a step above the next best offer, and proof of that offer is usually part of the deal.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines escalation clause in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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