The escalation addendum is a powerful tool in our real estate toolkit, whether we’re representing buyers or sellers. At its core, it allows a buyer to automatically increase their offer in response to competing bids, up to a buyer-defined maximum. It can be used alongside appraisal contingencies — either retained or waived — and the calculation is based on the net offer. Until recently, that calculation was fairly straightforward.

However, since the Northern Virginia Association of Realtors® (NVAR) forms were updated in July 2024, offers now include a new field — seller-paid buyer broker compensation — which can directly impact a seller’s net proceeds. This change has added complexity to how we evaluate and compare escalation clauses, and as a result, using an escalation addendum has become more nuanced. Recognizing this challenge, NVAR created a proprietary Escalation Addendum Calculator to help listing agents make sense of competing offers, while factoring in compensation and net proceeds. You can read more about how to use the calculator [here].

These changes have sparked an important conversation: Should agents still recommend, or counsel, their sellers to accept escalation clauses? Should we present them to our clients as a viable strategy, or avoid them altogether? This article explores the pros and cons of escalation addendums from both the buyer and seller perspective, how to communicate their value, and the ethical and professional implications of allowing personal opinion to override our fiduciary duty.

The Buyer’s Side

When working with buyers, escalation clauses can be incredibly effective in competitive markets. They allow buyers to strengthen their offers without immediately overpaying and can help them rise to the top of a multiple-offer situation while still protecting their financial boundaries. Buyers can set a strategic, conservative opening offer and establish clear parameters on how far they’re willing to go. This can create a sense of transparency and confidence — especially when paired with strong lender communication and clarity around appraisal.

That said, there are also drawbacks. Including an escalation clause reveals the buyer’s maximum offer upfront, which could influence the seller’s perception of value, even if no other offers trigger that escalation. In situations where there are no other offers on the table, the clause could be unnecessary or even perceived negatively. Buyers must also fully understand the consequences of promising a high escalation, especially if they choose to waive an appraisal. A poorly structured clause could lead to financing issues or difficult negotiations later. Additionally, some sellers may request “highest and best” offers and reject escalations on principle. This introduces potential ethical gray areas if an agent fails to explain those risks or if the clause is excluded without the buyer’s informed consent.

The Seller’s Side

From the listing perspective, an escalation clause can be a double-edged sword. On one hand, they can drive up the sales price and help sellers identify the most serious, competitive buyers. They simplify the negotiation process by reducing the need for counteroffers and back-and-forth conversations. Accepting escalation offers can also make the home more appealing to buyers who want to stay competitive without going all in from the start. When managed properly, escalation clauses can be a strategic way to increase both interest and final sale price.

But sellers — and their agents — must be aware of the potential downsides. Appraisal issues may still arise, especially if the buyer retains the appraisal contingency and the escalated price exceeds the appraised value. Post-settlement, calculating net proceeds has become more complicated, particularly when offers include differing buyer agent compensation structures.

Even with NVAR’s calculator, the listing agent must evaluate the full offer, not just the price. If escalation terms are vague, or if proof of competing offers isn’t handled properly, it can open the door to confusion or disputes. This makes it even more critical that agents approach escalations with a careful, well-informed strategy.

Both Sides — Remember your Fiduciary Duties

Ultimately, whether you’re working with a buyer or seller, explaining the potential benefits and risks of escalation clauses is part of your fiduciary duty. Our role as agents is not to dictate a client’s decisions, but to provide the information and context they need to make smart, informed choices. Personal feelings about escalation clauses shouldn’t interfere with our professional responsibility. In fact, refusing to use or accept an escalation clause based solely on personal preference — without a solid business rationale — can be considered unethical, unprofessional, and potentially even legally risky.

Real estate agents are bound by six key fiduciary duties: loyalty, obedience, disclosure, confidentiality, accounting, and reasonable care. Additionally, Realtors® are held to higher standards of honesty and competence under the NAR Code of Ethics Refusing to use an escalation clause for personal reasons may violate several of these. For example, loyalty requires that we always prioritize our client’s best interest. If an escalation clause would strengthen a buyer’s position or help a seller achieve a higher sale price, refusing to use one due to personal bias is a clear breach of that duty.

Obedience means that agents must follow all lawful, ethical instructions from their clients. If a buyer instructs their agent to include an escalation clause and the agent refuses — unless there’s a compelling reason related to the seller’s instructions or legal concerns — it could be considered unethical.

The duty of disclosure is also critical: agents must inform clients of all relevant options and strategies. Intentionally withholding or misrepresenting escalation clauses because of personal distaste deprives clients of a potentially valuable tool. For example, if a buyer wants to include an escalation clause and their agent says, “I don’t believe in those,” and refuses to discuss it further, the buyer is denied a strategic advantage. On the listing side, if an agent declines to present or seriously consider escalation offers — especially if the seller hasn’t given explicit direction to do so — it may be seen as limiting competition or even market manipulation. Sellers could miss out on stronger offers because the agent didn’t want to deal with the added complexity. In extreme cases, this kind of selective handling could be perceived as steering or favoritism, particularly if the agent allows escalation from some buyers but not others.

The professional and legal implications are serious. Refusing to write or present escalation clauses without a valid reason can expose an agent to disciplinary action, legal consequences, and reputational harm.