What Are Escalation Addendums?

A realtor escalation addendum is a document commonly used in real estate transactions to address situations where multiple offers have been made on a property. This addendum typically outlines the terms under which a buyer is willing to increase their offer price in response to competing offers.

Here's a general description of how a realtor escalation addendum works:

1. **Identification of Property**: The addendum begins by identifying the property in question, including its address and any other pertinent details.

2. **Initial Offer**: The addendum states the buyer's initial offer for the property.

3. **Escalation Clause**: The key component of the addendum is the escalation clause. This clause specifies that the buyer is willing to increase their offer price incrementally in response to higher competing offers, up to a maximum limit set by the buyer.

4. **Incremental Increase**: The addendum defines the amount by which the buyer is willing to increase their offer each time a competing offer surpasses theirs. This increment is typically a set dollar amount or percentage.

5. **Maximum Offer**: The addendum also sets a maximum offer limit, beyond which the buyer is not willing to escalate their offer any further. This ensures that the buyer doesn't commit to paying more than they are comfortable with.

6. **Verification of Competing Offers**: The addendum may include provisions for verifying the existence and terms of competing offers. This verification process ensures transparency and fairness in the escalation process.

7. **Expiration Date**: The addendum specifies a deadline by which the seller must accept or reject the buyer's offer, including any escalated offers. This deadline adds a sense of urgency to the negotiation process.

8. **Seller's Acceptance**: If the seller accepts the buyer's escalated offer, the terms outlined in the addendum become part of the purchase agreement.

9. **Conditions and Contingencies**: The addendum may include any additional conditions or contingencies that must be met for the escalation clause to be triggered or for the offer to remain valid.

10. **Signatures**: Finally, the addendum is signed by both the buyer and the seller, indicating their agreement to the terms outlined therein.

Overall, a realtor escalation addendum is a tool used to help buyers remain competitive in a competitive real estate market by automatically increasing their offer price in response to competing bids, up to a predetermined maximum limit.