Texas Escalation Clauses & Austin Real Estate

What is an Escalation Clause?

An escalation clause is a contract provision where the buyer offers one price (which is lower) but stipulates that they will increase this price by some amount if another, higher offer is received, typically with some price cap.

Sample Escalation Clause:

Buyer offers to pay $____ for the home, but if the seller receives a bona fide offer that is higher, buyer will increase the price to $____ above the amount of the other offer.
In most instances, we do not recommend adding an escalation clause to your contract. Why?

  1. They are not the norm in our market

    Escalation clauses are the norm in many markets, which means that listing agents & sellers in those markets understand and expect them. In Austin, escalation clauses are not the norm. This means that many listing agents & sellers are skeptical of this unfamiliar provision. Because of this, escalation clauses can actually work against you if you are competing with a comparable contract with standard terms.

  2. The Texas Real Estate Commission (TREC) warns against them

    TREC has instructed agents & brokers specifically not to enter escalation clauses into special provisions & instructs that any escalation clause must be written by an attorney. Many TREC licensed instructors warn against using an escalation clause under any circumstance. This can cause listing agents to be even more skeptical of these clauses, which can work against you in a competitive situation.

  3. They are contractually ambiguous

    Most escalation clauses require that a "higher bona fide offer" exist in order for the contract to escalate in price. The problem is that "bona fide" can be up to interpretation. Texas is unique that most contracts contain an option period and a seller or listing agent could ask a friend or relative to submit a higher-priced offer with an option period. At that point, a bona fide offer has been presented and the escalation clause increases the price of your offer to that amount.

  4. They can communicate indecisiveness

    Sellers & listing agents want the highest offer & best terms in a contract that is likely to close. By offering a lower amount that can escalate to a higher amount, some people interpret that you aren't decisive or sure of your offer price. You reluctantly will pay a higher amount, but you don't really want to. This can also make a seller or listing agent skeptical of your offer.
 

What Do We Recommend?

Sellers & listing agents want to work with the highest price offer, with the tightest terms, that will close. Unfortunately, a "magic bullet" (other than price & terms) doesn't exist. We recommend that you be very thoughtful about the price that you are willing to pay for any property. That price should be one that allows you to "sleep well". If you win the property, you'll be elated, but if you don't win the property, you won't have any regrets.  

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Erik Meath

Elizabeth Michael was awesome to work with! As a first time home buyer, she was able to explain the process clearly and professionally, from our first meeting, all the way through closing.

She was very communicative and we never felt we were left in the dark. She fought for us when we needed her to fight for us, and her advice was invaluable. She absolutely excels at navigating the Austin real estate market.

She was also able to recommend a great lender, insurance agent, etc., which made it feel like we had a whole team working for us. I’d recommend working with Elizabeth to everyone I know.

Priscilla Echegaray

We worked with Julie Stoakley to purchase a home since moving back from Florida. We were impressed with her knowledge of the incentives and mortgage strategies. We never felt lost in communication on where we stood in the buying process. We purchased a home with an incentive and with her knowledge we were able to obtain clarity and an understanding for it. She also helped us in negotiating repairs from the inspection process and were able to get a brand new roof! I would definitely recommend Julie to my friends and family!

Ran Archer

Crystal Hirst understands market conditions and how to position. She does her research well and helped us price our house to “SELL”. Indeed it sold much faster than our expectation, while multiple other units in the area, and in fact on the “same street”, still remain unsold. Ultimately Crystal brought us multiple interested buyers and we achieved higher than asking because of this multi-party interest that Crystal generated. We enjoyed our experience, her professionalism and excellent communication. We highly recommend Chrystal Hirst as your realtor.

Ran Archer

Crystal Hirst understands market conditions and how to position. She does her research well and helped us price our house to “SELL”. Indeed it sold much faster than our expectation, while multiple other units in the area, and in fact on the “same street”, still remain unsold. Ultimately Crystal brought us multiple interested buyers and we achieved higher than asking because of this multi-party interest that Crystal generated. We enjoyed our experience, her professionalism and excellent communication. We highly recommend Chrystal Hirst as your realtor.

J O A

I have been thoroughly pleased with my experience with Bramlett Residential and my realtor Tyson Hombroek. Tyson provided outstanding service in helping me with the sale of my house. He is very professional and on top of the market. We stayed in constant communication and he was helpful in answering all my questions I had. This was a great experience. I highly recommend them.

Trey Gillingwater

Kasey Gilliam was very professional and communicated through the whole home buying and searching process. highly recommend working with her. She has great expertise in Austin and lead very helpful with all of our home buying questions and concerns!

Matthew Courtney

Vicki Duran from Bramlett was extremally informative and made the whole sales process effortless. I used her to not only purchase my home 4 years ago but also for the sale of the same home. Communication is key for me and Vicki was available at any time to answer questions and to keep us looped in during negotiations and or pending offers. Her attention to detail really stans out and had her clients best interest in mind at all time.

I highly recommend Vicki to anyone looking to purchase a home or sell their home, having used her for both I know you will be glad you did.

Philip Storey

Elizabeth is AMAZING!!! She went above and beyond to secure me an absolutely beautiful home. HIGHLY recommended.

cody oxford

Elizabeth is amazing at her job. She found my roommates and me a great house and made the whole process very easy 10/10

chandan singh

Elizabeth was great and easy to work with and helped me a find a tenant quickly. She was prompt in communication and I would highly recommend her to everyone finding a new tenant

Lizzy Crowne

Elizabeth has helped me find a home not once, but twice! She’s incredibly responsive and communicative- Both times I’ve worked with her, she has prioritized what I’m looking for, been super realistic and honest, and is always my advocate. I’m so grateful for her hard work!

Blake Weinreich

Elizabeth was extremely helpful in our process of buying our first home. She was extremely responsive, friendly and made the home buying process extremely simple and easy. Thanks again Elizabeth you’re the best!

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