Escalation Clauses Help Buyers Purchase Houses in Tough Bay Area Real Estate Climate

Houses for sale in the Bay Area typically have a great deal of competition from interested buyers. It’s one of the few areas in the country where there’s a perpetual seller’s market in place. Appreciation of property values is the norm, in during a time in which all areas of the country are experiencing unprecedented appreciation in the housing market, San Francisco has shown enormous positive valuation in a market already regarded as one of the most lucrative in the US.

For buyers entering the market for the first time, or moving to the Bay Area for work, this means that they’re going to face heavy competition from other interested buyers. It also means preparing for a bidding war, a reality that is caused by both low inventory and heavy demand. It also means that a buyer has to be prepared for a bidding war, prepared for the competition, and able to close on the deal when the seller is happy with the offer.

Serious buyers come to the table with the loan already secured by the bank. They’ve also elicited the help of a buyer’s agent who can keep them in the loop about the level of competition for a particular home. Houses for sale in the Bay Area are likely to have a lot of competition, but it’s helpful to know exactly how much competition an individual house will have. Buyer’s agents are paid to know such things, and there job is to help facilitate the purchase of the home.

One thing that interested buyers can do that will help them is ask about an escalation clause. What an escalation clause does is prevent your bid from getting beaten, up to a certain point. That is to say, if you fall in love with a certain house, you can tell your buyer’s agent that if another interested buyer beats out your bid, you’re willing to raise the bid up to a specified amount. This shows the seller’s agent that you’re really interested in the house, and if you’ve come prequalified or, better yet, preapproved for a loan, and you’re ready to close, an interested seller is much more likely to close the deal with you than another interested buyer, who might keep raising the bid, but doesn’t have their loans preapproved, nor their financial ducks in a row.

The Bay Area housing market is one of the toughest in the country for new buyers to break into, but with carefully planning and a knowledgeable buyer’s agent, it’s not beyond the scope of possibility, and an escalation clause is one more tool in your shed for closing on the house of your dreams.

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