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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Bramlett Residential, and more importantly Joe Gage were amazing at helping my wife and I buy our very first home. Bramlett & Joe made the whole process stress free, and really helped expedite the process for us. We had no idea we would find exactly what we were looking for so quickly! Joe was very knowledgable on numerous things such as market strategy, what things to look for while touring homes, and he quickly understood exactly what type of home my wife and I were looking for. He was also in constant communication with us throughout the whole process which helped us feel very comfortable in a situation that could have been stressful. I will confidently recommend Bramlett & Joe Gage to anyone in the Austin area going forward!

 

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Jan was wonderful to work with!  Bringing a toddler while house-hunting can be a nightmare, but Jan made it fun for all of us.  It felt more like exploring the area with family.  We didn’t feel any rush or pressure to buy, and we knew Jan had our best interests in mind.  She was always friendly, but when it came time to negotiate, she fought hard to get us the best deal.  I would highly recommend working with Jan whether you are buying or selling.  If we ever move, we’ll definitely be asking for Jan again.

Jan is fantastic!  We moved from out of town, and she was great about showing us around and researching schools and home-builders for us so we could make the right choice.  Jan showed us both rentals and new builds in a rainy, single-day house-hunting trip, and, despite the weather, her enthusiasm never wavered.  We have been in Leander for two years now, and Jan still keeps in touch and serves as a source for local info!  If we ever move again, she’ll be our first call!

Because we were first-time home-buyers, Jan was the wind beneath our wings while we worked with her.  She listened to what we wanted and made sure that we weren’t getting into something that would damage us in the long run.  She was passionate, caring, and very knowledgeable.  We were from out of town, and she taught us a lot about the area and gave us some insider knowledge that helped lead us to a great home.  She gave us advice for the future when we might become serious about homes, and she prepared us not just for purchasing our home but also for potentially reselling it years down the line.  Working with Jan was easy and enjoyable; she was on our side from day one.  She went above and beyond my wildest expectations and really raised the bar for realtors in my eyes.

Jan Daum is a realtor with panache!!!  When you sign up with her to sell your house, you can rest assured she will get it done fast, at the best possible price, and with all the tools in her toolbox put to use.  I’d no sooner signed on the dotted line than Jan showed up with a stager and a photographer.  My home went online with a very classy display and sold over asking in less than a week, and with multiple offers!  Jan did not even get a chance to hold the planned open house.  Jan was with me every step of the way and kept in touch constantly.  I would recommend Jan Daum as a realtor for any property and at any price point.  You will not be disappointed with the service or the results.

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We enjoyed working with Elken at Bramlett Residential Real Estate for buying our first home. She’s detail oriented, help us address concerns, and always willing to answer questions that we have along the way. Highly recommended and we would definitely work with Elken again when an opportunity comes in the future.

 

As first time home buyers and new to the area, Elken Miller was a true blessing. Elken went above and beyond to search for a perfect home for our growing family, before the baby’s arrival. She listened to our needs, wants and stayed within our budget. She walked us through each step and treated us like family. We are now first time home buyers of a brand new build, in a beautiful area with a large backyard where we can create memories with our baby! Elken is professional, knowledgeable, caring and will not give up on what you’re searching for until she finds it. She’s the best and we truly thank her for everything.