When and How to Use an Escalation Clause in a Multiple Bid Situation

The Chicago real estate market is no stranger to competitive buying and bidding wars. With an active market, multiple offers are commonplace and buyers are beginning to seek an extra edge for their offers.

We have spoken previously about tactics for winning a multiple bid situation. Many times, however, it really does come down to the final price. That is to say that what you're willing to pay vs. what the competitive buyer is willing to pay, will largely determine which offer the sellers will go with.

It is in cases like this that an escalation clause may work in your favor. With our thanks to Realtor.com, here is some helpful information to know about escalation clauses - what they are, why they happen, and what the outcome might be for you: 

What is an escalation clause?

An escalation cause is essentially an "if, then" statement, allowing a buyer to say: "I will pay x price for the home, but if the seller receives another offer that is higher than this, I will increase my offer to y price." Simple, on the surface, but it does get a bit more complicated in the details of the transaction.

Here are its three basic components:

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