What is Escalation Clause?
An escalation clause is a provision in an offer that automatically raises the buyer’s price by a set amount above any competing offer, up to a stated maximum. It is used in bidding wars to stay competitive without overpaying blindly. The buyer usually must show proof of the competing offer.
Example: A buyer offers $600,000 with an escalation clause to beat any higher offer by $5,000, up to $640,000; when a rival bids $615,000, the buyer’s price escalates to $620,000.