What is a price escalation rider?
This rider let’s a home buyer say, “I will pay X price for this home but if the seller receives another offer that is better than mine, I’m willing to increase my offer by X price. However, it should not exceed X price.”
Here’s an example:
Buyer A offers $100,000 on a home with a rider that states, in the case of multiple offers; increase Buyer A’s offer by $1,000 and the maximum escalation is $110,000.
If no other buyers put in an offer, Buyer A’s offer stands at $100,000. However, let’s say another buyer comes along…Buyer B. Buyer B puts in an offer at $105,000. Buyer A’s offer automatically goes up to $106,000. If another buyer, Buyer C, puts in an offer at $110,000, Buyer A would not have the best offer as their escalation rider topped at $110,000.
Click HERE to view the price escalation rider our brokerage uses.
Why use a price escalation rider?
This rider protects a client from overpaying. It states that you are only paying X amount more than the next highest offer and ONLY kicks in when other offers are not contingent on anything. It also protects the client as it gives the buyer a better chance of saving money and prevents them from having to go up to the highest bid.
*It’s important to know that not every agent will accept a price escalation rider.
When to use a price escalation rider?
Price escalation riders are used during multiple offer situations and lets the seller know the buyers are really serious about pursing the home. Remember, you should never pay more than what you are comfortable with. Also, keep in mind that in order for a price escalation rider to kick in the sellers have to show us the other offers. That way we know for sure the other offers exist.
Need more clarification? Contact Shay!
