What is an escalation clause and should I use one?

An escalation clause automatically increases your offer price by a set increment above any competing offer, up to a maximum ceiling you specify. For example, you might offer to pay $5,000 more than the highest competing bid up to a cap of $550,000. It can be useful in competitive markets because it keeps you in the running without overpaying from the start. However, escalation clauses are not part of the standard Arizona purchase contract and require an addendum, and some sellers and listing agents prefer straightforward offers. The clause also reveals your top price, and it only works if the seller discloses competing offers. In practice, a strong initial offer with clean terms is often more effective than relying on escalation.