Should You Add a 'Bump Clause' to Your Purchase Contract?

In the current pandemic housing market, buyers are looking for anything they can use to sweeten their offer in the eyes of the seller. Enter the "bump clause", a small addition to home purchase contracts that is gaining popularity in some areas. Bump clauses are simple: they allow a seller to continue to market their home after accepting an offer until a buyer's sale contingencies are satisfied. If the seller receives a better offer during that time, the original buyer must either waive their contingencies or get "bumped" for the new deal. Keep reading to learn how you can utilize a bump clause to your benefit.

Bump clauses are most common in areas where the housing market was very competitive in the recent past but has since started to cool. Sellers in these areas often have slightly unrealistic expectations about how much their home is worth, which means that buyers need to find a way to coax them into accepting their offer. Of course, bump clauses can be used by both buyers and sellers as potential ways to gain leverage during negotiations.

For a buyer that simply can't afford to offer more money or buy a home before the sale of their old home, a bump clause can incentivize the seller to accept their offer even with their home-sale contingency. If a new buyer then offers a deal for more money or with no contingencies, the original buyer will have a set amount of time to either satisfy or waive the contingency before the contract is terminated. Importantly, the seller can only use the bump clause up until the buyer's contingency is met.

For sellers, bump clauses offer the flexibility to continue searching for the perfect deal while already having a purchase agreement in place. It can also be used as leverage during any future negotiations with other buyers, as they will have no choice but to beat the original offer in either price or terms if they want a chance at securing the home. Of course, sellers should always remember to carefully weigh the pros and cons of the new offer before invoking the bump clause.

You can learn more about bump clauses and how to maximize their effectiveness by visiting realtor.com.