*Please note: Any questions regarding Legal Hotline Spotlights should be submitted via the Virginia REALTORS® Legal Hotline. Our attorneys are unable to respond to questions through our comments section.
Q: How do escalation clauses work in conjunction with each other?
A: It depends on how the escalation clause term is drafted. But in general, escalation clauses increase the base amount of an offer by a certain figure up to a predetermined amount, provided there is another bona fide offer.
For example, you have two bona fide offers. Offer A is for $150,000, escalating by $1,000 up to a maximum of $175,000. Offer B is for $155,000 escalating by $2,000 up to $180,000. Let’s do the math.
Offer A escalates to $175,000 and offer B escalates to $177,000.
Now, must the seller accept offer B?
No. The seller can accept either offer if they so choose. They are not bound to accept a highest and best, but are allowed to look at the terms, conditions, and other legally acceptable reasons when deciding which offer to accept.
What is the Legal Hotline?
The Legal Hotline is a member benefit that has been supporting members for over 25 years. Our team of lawyers answers your important questions about real estate transactions quickly and accurately (usually within three business hours!).