An escalation clause, sometimes called an escalator, is an addendum to a Purchase Agreement. It is usually used when you believe a home is going to receive multiple offers. It allows a buyer to win within their terms. It states that we are willing to beat any offer on the table by increments of $500, $1,000, $2,000, or whatever you choose, to the max price you are willing to pay for the home. So, for example, if your offer on a home is $200,000, but you are willing to pay up to $220,000 for that home, you would offer $200,000 for the home, but will beat any other offer that comes in by $2,000 (or another agreed upon amount) up to $220,000. So if another offer comes in from another party and they offer $210,000, your offer would automatically increase to $212,000 to beat the other offer and you would win.

This helps ensure you get the home you want but don’t overpay for the home. You choose the max price you’re willing to go up to. It should be an amount where if you’re beat by another buyer by $1,000, you’re okay walking away from the home.

Wouldn’t you rather pay $212,000 for something rather than $220,000? Beware that not all agents will accept this type of language on a purchase agreement as it doesn’t necessarily show the highest amount you’ll offer, and they want the highest amount for their sellers.