Contract Offer – Escalator Clauses

·1 min read

Buyers attempting to secure a home in a seller’s market can sometimes require an unconventional approach when making a contract offer.

One approach can be the use of an escalator clause in the contract offer, but it does have risks for the buyer.

A properly drafted escalator clause allows a buyer’s contract offer to automatically adjust the purchase price offered upward to be higher than the highest purchase price offered.

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In theory, the escalator clause allows the buyer’s offer to end up as the highest purchase price offered once all the offers are received by the seller.

However, in practice, poorly drafted escalator clauses can be problematic and end up with unintended consequences.

Often we see escalator clauses lacking clear conditions on the escalation of the purchase price and this leaves the buyer open to paying well more than they ever expected for the property.

An escalator clause can be helpful for buyers, but it is important to have an attorney assist in the drafting of an escalator clause to minimize the risks of this approach.

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