What's an Escalation Clause?
What’s an Escalation Clause? Can buyers use this little-known clause to their advantage? Watch the video to find out or read about Escalation Clauses using the transcript below the video.
With the real estate market being slanted towards sellers, I hear talk about buyer’s using escalation clauses. An escalation clause escalates an offer to a higher price based on prices of other offers. For example, a buyer may offer $700,000, but escalate in $5,000 increments above any other offer with a maximum price of $800,000. While these clauses are widely used in other states, they’re rare in Texas. Why? Because the Texas Real Estate Commission prohibits agents from using them. Yes, rule 537.11(b)(5) specifically identifies escalation clauses as something an agent cannot add to a contract because it’s considered the unauthorized practice of law. However, a buyer can write their own or have an attorney draw one up. If a seller receives one of these offers, the listing agent cannot advise clients because it’s considered to be giving legal advice, which is also against the law. Instead, a seller should seek attorney counsel or request the buyer to remove the clause.
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