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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We had the pleasure of working with Will Mackintosh as our agent, and couldn’t be happier with the experience. From start to finish, the process was incredibly smooth and easy, thanks to Will’s expertise and professionalism. He guided us every step of the way making what could have been a stressful experience surprisingly enjoyable. Will’s attention to detail and dedication to finding the perfect property for us truly stood out. We couldn’t have asked for a better agent. I highly recommend Will and Bramlett Residential to anyone buying or selling a home in the Austin area.

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Danny is amazing. We are first time home buyers and knew almost nothing going in other than what we could afford. Danny is patient and had references for mortgage companies, home inspectiors and specialty inspectors. He was able to negotiate on our behalf and guided us every step of the way from our staring offer to the day of move in. Didn’t matter the time of day, Danny was always available and made sure we understood everything we were signing. Buying a home is scary especially during pandemic but Danny made it seemless and went above and beyond to take care of us. Cannot speak highly enough of Danny.

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Linda is very knowledgeable in the area and really helped me (out state buyer) to learn the important facts about the home locations that I was interested in. She provided great advice as part of the negotiation. She is very professional and dedicated to taking care of her customer. She even replied to one of my texts at 2AM in the morning! I highly recommend Linda if you are looking for a very knowledgeable and experienced agent who delivers results. After the closing date she is still following up with me to answer any questions and help me with finding services to take care of my new home.

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We had a great experience with agent Kasey Gilliam, both coming and going! Kasey helped us find our lovely home five years ago, then helped us sell it again when we moved back east. She knows the market and has broad experience with Austin neighborhoods and homes. We trusted her advice — and she was always available when we had questions. She and her team kept our house safe and managed what felt like a million showings. We would happily work with Kasey again if we ever return to Austin, and are happy to sing her praises!

Marc S.

First, Carol is warm and helpful in every way. With Carol’s help, we bought our house remotely. She gave us great guidance: “This house would be great for you. The neighborhood is good.” Her office staff was also supportive – picking up the key from the closing company; going out to the property when a workman was there. It also must be said that after so many years in the business, she knows the market very well. Carol knows her stuff.

gregjgloria

Carson, is an outstanding Realtor. He has been our agent for the past 7 years and we have purchased two houses utilizing his expertise.. Carson is very professional and courteous always thinking of his clients needs. I strongly recommend him and know that you will be very satisfied with his services.

Nathan R

I found Carson by searching Real Estate Agents in Austin who are also investors/landlords. Carson is certainly worth a call! I contacted Carson to ask if it made sense to stay in touch and possibly meet because I was looking for a 2-4 plex in Austin. Being from California and only having been in Austin 1-2 months at the time, it was critical for me to meet a real estate agent who was familiar with landlord’s perspective in the Austin market.<br/><br/>Carson and I didn’t do business that day or even that month. Later in the year, I was more prepared to get in depth and serious with the search so I reached out to Carson and he set me up on an MLS list with my search criteria. As my wife and I disqualified zip codes Carson was patient enough to update our search criteria promptly. Along the search Carson advised us and answered all our questions. My wife found a duplex listed as “coming soon” on Zillow so we drove past it and asked Carson what this listing status meant. Carson got us an appointment to view the duplex the first day it came on the market, our offer was accepted and Carson was there every step of the way.<br/><br/>After closing Carson continues to offer value to the transaction. Carson called me in early January to recommend that I fill out paperwork to make the duplex my homestead. This was very useful because, coming from California, I didn’t know about this. I know I can call Carson any time with questions around real estate. Carson is very personable, relatable, yet still very professional.

juliekimball03

Carson was recommended to me by a friend and I’m so glad that I took him up on that recommendation!! Carson helped my find a home last spring and it was a great experience. He took into account all of the things that I was looking for and showed me multiple listings until we found the right place. He was also extremely knowledgeable about and responsive to questions during the closing process. I knew that if I was concerned about something or had additional questions I could always give him a call. Carson is fun and personable as well as very knowledgeable about the real estate industry in Austin, you couldn’t ask for a better real estate agent!

bwinburn07

Carson was wonderful to work with. We worked with him during the holidays and we still got immediate responses from him. He helped us sell our home and purchase a new home. We’d pick him again in a heartbeat!

markbiversen

My wife and I could not be more pleased with the amount–and most importantly, quality–of professionalism, knowledge and personalized service that Carson Gallagher displayed throughout the process of selling our home in Austin. We walked away from our first meeting with him with complete confidence that he would have our best interest in mind and that confidence only increased over time. We both tend to be worriers by nature, and Carson’s calm, informed and rational approach to every step of the transaction worked absolute wonders in quashing our stress levels. Simply put, if he said “don’t worry about X, Y and Z,” we didn’t worry. In hindsight, he was correct in his assessment every single time. It was truly a pleasure to work with Carson, and, without question, he’s the first person we’re going to recommend to anyone either looking to sell or purchase a home in the Austin area. <br/><br/>Mark Iversen

jtorres7233

The main “takeaway” I had when dealing with Mr. Gallagher (on 2 separate deals now) would be that I’ve walked away with more knowledge about the buying/selling process than I did going in. Mr. Gallagher was very adamant about letting me know that he was there to work for me and he would do anything (within reason, of course) that I asked throughout the process; with that being said, he was also expressive in letting me know that he would inform me of the impact of any decision I make concerning the deal at hand, in turn making me feel very comfortable knowing that I had the information I would need to make informative decisions. He’s on my phone for future deals and referrals to my circle of friends and family.

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