Contracts
An escalation clause that provides the buyer will pay $1,000 above any competing offer up to a maximum of $310,000, when the listing price is $299,000, is designed to:
APrevent the buyer from paying more than $299,000
BAutomatically increase the buyer's offer above competing bids while setting a cap to protect the buyer✓ Correct
CForce the seller to accept the buyer's offer
DLock the seller into accepting the first offer received
Explanation
An escalation clause automatically outbids competing offers by a set increment. The cap protects the buyer from bidding more than they intend.
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Key Terms to Know
Right of First Refusal
A contractual right giving a party the opportunity to match any offer received before the owner can accept it from a third party.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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