That Escalated Quickly: Pros and Cons of Escalation Clauses in Purchase Agreements
By: Patricia B. McMurray, JD, Melissa M. Grand, JD, and Derbigny Daroca, JD
Baker, Donelson, Bearman, Caldwell & Berkowitz, PC
450 Laurel Street, Chase Tower North, 21st Floor
Baton Rouge, Louisiana 70801
The real estate market has become increasingly competitive, especially in the aftermath of the COVID-19 pandemic. One tool to compete in this market that REALTORS® are discussing with their clients is using escalation clauses in a buyer’s offer to purchase real estate.
This article discusses escalation clauses and the potential impact on buyers, sellers, and their agents in real estate negotiations.
While escalation clauses seem attractive in a fast-paced market, the potential risks may be greater than the rewards. In fact, some states, like Texas, have legislatively prohibited escalation clauses. As of the writing of this article, escalation clauses are untried in Louisiana—there are not Louisiana cases, legislation, or regulations interpreting escalation clauses.
So, while there may be some benefits, as explained below, it is important that REALTORS®, buyers, and sellers understand all of the potential pitfalls of escalation clauses, and that the risks may sometimes outweigh the possible rewards.
REALTORS® should discuss the pros and cons of escalation clauses with their clients. If an escalation clause is used, including a disclaimer is prudent for risk management. Buyers and sellers should consult their real estate agents and attorneys when contemplating offering and/or accepting escalation clauses to minimize risk and maximize their opportunities.

