If you’re buying a beach home, you may consider using an escalation clause. Over the last several years, this strategy has shifted with the price variation during COVID. Glenn Phillips, CEO of Beach Homes Realty, discusses whether you should use an escalation clause when buying a beach home.
- Escalation Clause: Automatic Price Increase Formula. These clauses state that if you are outbid on a house, you will automatically bid higher up to a certain point. These were very popular during COVID-19, and there are a few reasons to use them.
- Keeps Offer Amount Competitive. If you submit a price and get outbid, the seller may not come back to you for another bid. Escalation clauses attempt to keep your offer competitive in this case.
- Less Popular. Escalation clauses were popular during COVID-19 but have since calmed down. It’s also become less popular because sellers and selling agents don’t want to do the math. Escalation clauses can become complicated with multiple increments, ceilings, and more.
- More to Offer Than Money. Besides money, other things factor into an escalation clause. You could offer the timing of when you take possession, closing costs, and more. Additionally, sellers are tired of going through multiple offers. They just want your best offer upfront.
- Varies By Local Market. Escalation clauses happen less in some markets than they do in others. However, the opposite is true as well. Using these clauses will be more beneficial in some areas than others.
So, should you use an escalation clause in your offer to buy a beach home? It’s a strategy that suits some people but isn’t necessary. Ask your local agent about whether it will give you an advantage or not. Visit beach-homes.com to connect with agents ready to help you find your beach home.