It’s probably official now: So-called “escalation clauses” are back in the Boston area, last seen here about 10 years ago during the run-up to the previous peak prices around 2005.
What are “escalation clauses”? They’re a little-used negotiating tactic deployed as a sort of last resort during multiple-bid situations, i.e. in a hot housing market with regular bidding wars.
They’re rather simple. A seller asks for bids. Everyone else puts down a firm price offer. But one person (or couple) puts in writing that he or she will beat any of those bids by a set amount, say, $2,500, $5,000, $10,000 or even $15,000.
The person issuing the “escalation clause” almost aways reserves the right to see the other bids (with names crossed out) and the opportunity to back out, within about 30 to 60 minutes, if the highest bid is ridiculously high. Sometimes you win. Sometimes you don’t.
There’s some debate whether they’re worth it. But there’s little doubt about this: Their apparently growing re-emergence in the Boston market, after 10 years of relative hibernation, is a sign that we’re probably approaching peak pricing levels in some sub-sectors of the market.
But, hey, who knows? This is Boston. The market here is so unpredictable and crazy these days.
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Updated: December 2017