A buyer in Washington submits an offer that includes an escalation clause stating: 'Buyer will pay $2,000 more than any competing bona fide offer, up to a maximum price of $580,000.' The seller receives a second offer for $565,000. If the seller accepts the first buyer's offer with the escalation clause, what is the final contract price?
Correct Answer
B) $567,000, because the escalation clause adds $2,000 to the competing offer price.
An escalation clause automatically increases the buyer's offer by a specified increment above a competing bona fide offer, subject to a stated maximum. Here, the competing offer is $565,000. The buyer's escalation clause adds $2,000 above that competing offer: $565,000 + $2,000 = $567,000. Since $567,000 is below the $580,000 maximum cap, the contract price is $567,000. The escalation clause only triggers up to the maximum — it does not automatically jump to the ceiling price when any competing offer exists.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
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