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Rangely Garcia for Money

In today’s strong seller’s market, potential homebuyers had better be willing to step up their game. To edge out competing bids, some buyers might want to consider something known as an escalation clause.

An escalation clause is an addendum to an offer for a home that automatically increases the bid by a predetermined increment if a competing bid comes in. According to data from brokerage Redfin, 17% of offers the firm makes include escalation clauses. Such clauses can be particularly useful in a low-inventory market. When a buyer uses the clause, they are signaling that they want to make a more attractive offer, ultimately driving up the price.

Real estate agent Tye Stockton of The Stockton Group of LIV Sotheby’s International Realty in Vail, Colorado, currently has three-properties under contract where an escalation clause sealed the deal. In multiple bid situations, he said escalation clauses often come into play in hopes of winning a home.