Abnormal Peoria housing market creates more escalation clauses

Nathan Law

PEORIA – While an escalation clause may seem like a great way to win the bid when a house gets multiple offers, local real estate agents are cautious about using them.  The escalation clause is an addendum prospective buyers can submit with a real estate contract when bidding on a […]

PEORIA – While an escalation clause may seem like a great way to win the bid when a house gets multiple offers, local real estate agents are cautious about using them. 

The escalation clause is an addendum prospective buyers can submit with a real estate contract when bidding on a house. The clause allows buyers to propose not only the price they will pay for the house, but also the amount they will go over that price if a higher bid comes in.

These clauses are typically used in a real estate market where homes are getting multiple bids in a short amount of time. For that reason, escalation clauses weren’t common in Peoria until this year, local real estate agents say. 

“I think they became more prevalent starting in February. That’s when I started hearing the chatter about it,” said Jason Catton, an agent with Realty Executives Acclaimed and president of the Peoria Area Association of Realtors. “They can be a good tool, but my fear is buyers put too much faith in them. If they really need a house, and they are in a situation where time is of the essence, it may not be the best thing to do.” 

More:Real estate agents give 4 tips for buying a home in Peoria’s challenging housing market

Pros and cons for escalation clauses

Some real estate agents refuse to use them. Others use them carefully, providing lots of education to their clients. Since they are a legal contract, escalation clauses should be drawn up by a lawyer, but some real estate agents have taken care of that by providing a contract where buyers can fill in the blanks. 

“Being with Coldwell Banker, our brokerage had an attorney prepare one, so we have a standard one that we can add as an addendum to our PARR residential contract. In that case the buyer doesn’t have to have an attorney prepare one,” said Kendra Sipes, an agent with the Knell Group. 

There are pros and cons to using the clause, Sipes said. One of the pros is that it gives the buyer a second chance to win the house after the initial offer. 

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