When dealing with buying a lake home, you might hear the term “escalation clause”. If you’re familiar with this term, you might be wondering if it is a good or bad thing. Even if it is something you’ve never heard of before, finding out what it means can benefit you in the future. Lake Homes Realty’s CEO, Glenn Phillips, discusses what this is and whether an escalation clause is something good or something bad.
- Escalation Clause: Automatic Price Increase Formula: This was something that was very popular during Covid-19 and, in particular, frenzy buying. Basically, people were wanting to make an offer and that be it. They were not willing to go through the hoops of making a second offer. Simplified more, you would make your offer and if someone came in with a higher one, you’d understand yours would jump up some amount.
- Keeps Offer Amount Competitive: Due to these different escalation clauses for properties, it was more of a competitive area. Instead of the one amount being out there, it was almost a stair-stepping increase between offers.
- Less Popular: Since Covid-19, these clauses aren’t as popular. One reason in particular is that it is becoming too much for the sellers and their agents to manage. Sellers got to a point where they wanted people to make their best offer. Now, sellers will ask buyers to “give us your highest and best offer”.
- More to Offer Than Money: Oftentimes, escalation clauses can overshadow some of the other things that could potentially be offered. Things such as an additional property (a boat, furniture, etc.) or a different contribution of closing costs, etc.
- Varies By Local Market: These clauses all vary depending on the market. Utilizing a lake agent, like one at LakeHomes.com, would be beneficial. The agents understand their markets and the things that go into them, such as inflation rates.
Before going into the buying process and expecting things to flow a certain direction, reach out to a lake expert for more help. They are always willing to give advice and information when needed.