The Hidden Dangers of an Escalation Clause
In real estate contracts, an escalation clause—sometimes called an escalator clause—allows a buyer to increase how much they’re willing to pay if a seller receives a better offer. On the surface, this can seem like a good option when you have a client who is determined to have their offer chosen in a seller’s market. Though legal, escalation clauses can result in some serious issues that may end up in a disciplinary case or worse, a lawsuit. Your Offer May Not Be a Binding Contract For offers that include an escalation clause, the sales price in the offer itself tends to be vague, and according to attorneys representing the Tennessee Association of REALTORS®, some courts may consider it a deficient contract. Even with a price cap, it would be up to the court to decide if the contract constitutes a firm and statuary offer. Your Final Price Could Be Higher Than Your Appraisal In Nashville’s booming real estate market, prices are known to increase significantly when multiple offers are on the table, oftentimes going beyond the appraisal limit. As a buyer’s agent, you’re responsible for making sure your client knows they will have to make up the difference (with cash), [...]
