How To Use an Escalation Clause To Win a Bidding War Without Overspending

You finally found the perfect home, you’re excited, and you write an offer. Then your agent calls, saying there are multiple offers on the table. Now what?

One strategy you may not have heard about is called an escalation clause (Some people call it an “escalator clause”). It’s a way to bid on a property you really want without constantly rewriting your purchase price. Here’s how it works:

You start with a base offer. For example, let’s say the home is listed at $250,000 and you write a full-price offer at that amount. Your escalation clause then says you’ll increase your offer by a set amount, maybe $2,500, $3,000, or $5,000 above any competing offer, up to a maximum price you set.

In this scenario, if another buyer comes in at $255,000, your offer automatically rises to $257,500, beating them by $2,500. However, if another buyer goes all the way to $265,000 or higher, your clause caps out. You won’t go beyond the maximum you’ve set.

For the clause to apply, you also have to see proof of the other offer.

I recently had buyers who used this exact strategy. Their home had multiple offers, but with the escalation clause, they were able to win without overspending. And it’s not just for starter homes. I’ve seen escalation clauses used successfully on properties over $600,000 as well.

However, this approach isn’t for everyone. You need to talk to your lender first and make sure you’re pre-approved for the maximum amount you’re willing to pay. And remember, your offer still has to meet appraisal requirements. If the appraisal comes in low, you’ll either need to renegotiate or have the cash to cover the difference.

An escalation clause can be a smart tool in today’s competitive market, especially when homes are drawing multiple offers. It won’t guarantee a win, but it can give you the edge you need.

If you’d like to see a breakdown of how it works or talk through whether it’s right for you, please contact me at (607) 795-2904 or vickischamel@kw.com I’d be happy to walk you through it step by step.