Get the Hubbard out of the Cupboard - buying and selling in a "Buyer's Market"

By
Real Estate Agent with Berkshire Hathaway HomeServices New England Properties

Simultaneously, buying and selling a home can be a tricky proposition, especially in the current "Buyer's Market." 

Kinda like "Which came first, the chicken or the egg?"   Do you find the home you want to buy and then put your home up for sale or do you put your home on the market before you start looking?

Let's assume you don't have to move,  You just want a bigger, smaller, more expensive, less expensive home, or a different location.  First you want to make sure that the home you desire is out there.  So, you decide to start with a home search.  Amazing  - there it is - the home of your dreams...but...you haven't even taken the first step to listing your house and you need to sell it, in order to buy.

Okay, maybe the way to go is to make sure you can sell your house, before you start thinking about your new dream home.  But what if a buyer appears the first week and you haven't even begun to identify the home you want to buy?

You get the picture.   Making both sides work together can present an interesting balancing act.

You don't want to miss buying the great listing, that just came on, but you also don't want to sell your house and have no where to go.  What you want is both transactions to happen together.

In the not too distant past, buyers were falling over each other to outbid the competition and purchase everything that came up for sale.  Ah, the good old days - a red hot "Seller's Market."  But, times have changed.  Listings are now taking 80, 90 100 days or more, to come up with an offer.  Prices are being reduced once, twice, maybe three times before they become enticing enough to get buyers to "pull the trigger."

So, what's the solution?   It may be time to dust off the old Hubbbard Clause.  Exactly what is a Hubbard Clause?

A "Hubbard" is a contingency, added to the offer to purchase.  If the seller agrees to it, it will be added as a property sale contingency or addendum to the sales contract.  The contingency states that the purchase is contingent on the Buyer selling his/her property (typically, their current home.)  There will be a stated time period in which the sale must take place.  While the Hubbard is in effect, the Sellers can continue to market their home and should they come up with a legitimate offer, the Buyer is given the option of removing the contingency (usually within 1-3 days) and proceeding with the purchase.

During the "Hot" market, many sellers would not accept a Hubbard.  In effect, they felt it was taking their home off the market.  Often, agents would not show a Hubbard property or discouraged their buyer clients from making an offer on a Hubbard, citing that it would only be used to up the ante on the first buyer.

In the current environment, the Hubbard Clause may serve to facilitate the sale of both properties.  The sellers know that the buyers want to make the purchase and therefore, have the incentive to be more negotiable in the sale of their present home.  Sellers also have a better opportunity for receiving subsequent offers.  An astute agent will advise his or her buyer clients that, although the first buyers will be given the option to remove the contingency, if they do not have offers on their home, they may not be in a position to do so.  Thus, giving the second buyers a reasonable shot at making the deal.

Copyright © 2008 Marilyn Katz, WestportCTProperties.com, All Rights Reserved, Get the Hubbard out of the Cupboard - buying and selling in a "Buyer's Market

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Marilyn Katz

      Marilyn Katz

    Berkshire Hathaway Homes Services New England Properties    
     203-429-1041
  Servings Westport, CT
  and the surrounding communities  

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Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. Mike Hughes 11/24/2008 01:30 PM
Topic:
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Location:
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Tags:
buyers market
hubbard clause
buying and selling a home
home sale contigency

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Rainer
1,401,276
Vickie Nagy
Palm Springs, CA

Yes, we are using this clause locally in the current market, but I have never heard it referred to as the Hubbard clause.

Nov 24, 2008 04:01 AM #51
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Li-  It gives the buyer some real numbers to work with.  They know what the new house will cost them, which better determines how much room they have for negotiation on the sale of their house.

Sonja-  That's certainly a more traditional approach

Randy- The key to this is educating the agents.  For too many of them, Hubbard clause or Property sale contigency is simply something they memorized once, for a single question on their real estate exam.

Nov 24, 2008 04:23 AM #52
Rainer
88,383
Kathy Booth, Setting the Stage
Setting the Stage - Newmarket, ON
Home Staging and ReDesign Professional

Interesting information - thank you.   Kathy

Nov 24, 2008 05:02 AM #53
Rainer
4,449
Larry Van Druff
Re/Max Realty Centre - Olney, MD

Sounds like a home sale contingency with a kick-out clause. Never heard it referred to as a Hubbard. Is that perhaps a local/regional term? Here in the Balt/Wash area, those types of contracts were few and far between during the Seller's Market, but I am seeing them more these days. One big negative is that even though after accepting a contract contingent on the buyers selling their current home, the Seller's property no longer shows up as "active" in MRIS, our regional mls system. The property converts to Cntg/KO, (contingent with a kick-out clause) and since IMHO most agents only use the default "active" parameter when doing searches, Seller's house won't show up in most searches for available property.

 

Nov 24, 2008 06:33 AM #54
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Vickie- It basically is a home sale contigency clause.  In some markets (e.g. CT) it is known as a Hubbard clause

Kathy- You're welcome

Larry- I think buyer's agents will have to learn to broaden their scope in this market.  That includes being prepared to deal with short sales and foreclosures, as well as utilizing all the tools available to enable the transaction, such as offers with home sale contigencies

Nov 24, 2008 06:48 AM #55
Rainmaker
116,052
Pam Simpson
Bob Leigh & Assoc., LLC - Senatobia, MS
GRI, Broker-Assoc.

I've never heard it called a Hubbard clause.  Our state has a standard addendum for this contingency.  I have been involved in a couple of them and my clients came out on top both times.  Seems like I remember our form stating that if the purchaser waived the contingency, they were also waiving the financing contingency.

Nov 24, 2008 06:50 AM #56
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Pam- In my market, the home sale contingency (Hubbard) clause is separate from the mortgage contigency.  You can remove one without the other.

Nov 24, 2008 08:22 AM #57
Rainmaker
180,001
DeAndrea "Dee Dee" Jones
Home Buyers Marketing II, Inc. - Manassas Park, VA
The NorthernVARealEstateLady & DMVRealEstateChick

This is not always the best thing. I made the mistake of letting the sellers except a full price with closing cost offer with a home sale contingency and property inspection contingency to be peformed within 7 days of buyer getting an offer. We excepted the offer in April with a home sale contingency, buyer received an offer on their current home in July, my sellers were happy to receive this offer because the home had been on the market 6 months in April. We did continue to market the property as Active with contingency received showings but no offer.  In July 5 days after removal of home sale contingency the buyers performed a home inspection and submitted a release stating they no longer wanted the home.  There was nothing major wrong with the home, the sellers agreed to fix all items on home inspection if buyers would continue.  Buyers released contract and we had no recourse but to return their earnest money.  Home goes back on the market and was showing as a 9 month listing (not good).  After Nov 1st, a few more crazy offers and no more ratified contracts I suggested sellers plan to take property off the market and re list next year. 

WHAT DID I LEARN?

So if you do except a Hubbards Clause, require the buyer to perform home inspection up front at time of ratification not after removal of home sale contingency.  And any other contingencies up front.

Nov 24, 2008 12:22 PM #58
Rainmaker
235,832
Sarah, John Rummage
Benchmark Realty LLC, Nashville TN 615.516.5233 - Nashville, TN
Love Being Realtors® in the Nashville TN Area!

One problem with contingency to sell a home (and it taking months) is that the buyers get tired of the house, or find another house that they like better and want to get out of the deal for any little reason.

Nov 24, 2008 12:43 PM #59
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

DeeDee-  The home sale contigency should not be used to delay other contigencies,  e.g. home inspection, mortgage, contract.  Those should be done in the usual time frame.

Sarah & John- There is a contract in place.  The buyers can walk away if their house hasn't sold.  There is also a time frame on the contigency.  It is not open ended.  It can be as short as days and, even in a slow market, usually no more than 2 months.

Nov 24, 2008 10:06 PM #60
Rainer
55,401
Kelsey Barklow
Evans & Evans Real Estate - Johnson City, TN
423/948-9154, Marne Drinnon 423/202-2277

Second time reading your post and it's a good one. I have yet to write a Hubbard Clause into a contract but you never know when it will come up so thanks for the info.

Dec 17, 2008 09:41 AM #61
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Kelsey- In this market, I think Hubbard clauses may become more prevalent.  Of course, they don't always work. 

I had a double deal (sell and buy) go south because the first buyer couldn't sell her house at her asking price and rather than aggressively negotiating, let the Hubbard expire.  If the first "domino" doesn't fall, all the subsequent deals are off.

Dec 17, 2008 09:51 AM #62
Rainmaker
129,517
Mike Henderson
Your complete source for buying HUD homes - Littleton, CO
HUD Home Hub - 303-949-5848

I came across this looking for creative solutions.  Great post.

Jan 02, 2009 05:36 PM #63
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Mike- In this market, we have to look at all possible ways to get the deal done.  Thanks for stopping by.

Jan 03, 2009 01:01 AM #64
Anonymous
Andy Scherer

Marilyn, we are currently the on the buyer side of the hubbard clause.  We just accepted an offer and the contract is not clear because we have some things to finish based on the inspection.  However, the seller's of our (hopefully) future home is now requiring a mortgage committment next week...

Is that possible to get a mortgage committment without a clean sales contract?  Have you heard of this before?  I'm sorry for the long message, but I definitely appreciate any help you can give!!

Feb 23, 2009 12:18 PM #65
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Andy-  I am not an attorney nor a mortgage broker, so I can not give you a definitive answer or advise you on this. 

While you can be pre-approved for a mortgage, I question whether you can get a mortgage committment, not knowing when the Hubbard contigency is going to be removed.  I suggest you speak to your lender. 

Also, let the sellers know that you are working towards signing a contract on your sale and as soon as that is in place, you can remove the Hubbard contigency and move forward on the contract to purchase their home.  You do not want to remove the Hubbard contigency until you have a signed contract on your home.

Hopefully, you and the sellers each have an agent.  The two agents can work together to try to make all the pieces fall into place, simultaneously.

Feb 23, 2009 01:16 PM #66
Anonymous
donald bly

hubbard clause places the buyer in a buyers market at a disadvantage because many times the contingency is for the list price. buyers home goes 45 days before selling. buyer then cannot negotiate a better price on house he is buying.

what good is it? a contingency in this market will not sell a home any faster then without. The bottom line is you have to sell yours before you can buy his. the seller is going to market just as aggressively with the contingency as without.

   

Jul 09, 2009 05:54 AM #67
Rainmaker
274,189
Marilyn Katz
Berkshire Hathaway HomeServices New England Properties - Westport, CT
ABR, e-PRO - WestportCTProperties.com

Donald-  I don't know why you think the contigency has to be for list price. More often, if the buyer has negotiated a good price on their purchase, they are then more flexible in negotiating the price for the sale of their current home.  In that case, the hubbard has facilitated the sale of both homes.

Jul 09, 2009 06:25 AM #68
Rainmaker
639,717
Pete Xavier with X Group Real Estate Advocates
Investments to Luxury - Pacific Palisades, CA
Outstanding Agent Referrals-Nationwide

I was going to say we are in a different market and than I seen the spam.

Nov 01, 2012 04:32 PM #70
Anonymous
cammy

Grammar police here---"I seen..."? Not professional...

Sep 11, 2015 08:07 AM #104
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