Navigating the Intricacies of Hubbard Clauses: A Comprehensive Guide

By
Real Estate Agent with Coldwell Banker Choice Properties RES.0794741

In today's market, selling your home can be the easy part!  The hard part can be finding a home.  Historically, buyer's have been able to use what is called a hubbard clause.  However, in this low inventory environment, there has been little incentive for sellers to accept this contingency.  Below we will discuss the pros and cons.

Understanding Hubbard Clauses:

A Hubbard Clause, named after a legal case, is essentially a contingency clause added to a real estate contract. It allows a buyer to make an offer on a property while still trying to sell their existing property. The essence of this clause lies in providing a safety net to the buyer. It stipulates that the purchase of the new property is contingent upon the successful sale of the buyer's current property within a specified time frame.

Key Elements of a Hubbard Clause:

Time Frame: The Hubbard Clause typically includes a specific time limit within which the buyer must secure a buyer for their existing property. This time frame is crucial to avoid indefinite delays in the transaction process.

Notification: The seller is usually entitled to continue marketing the property and can accept other offers during the Hubbard Clause period. However, the buyer is usually granted the right to be notified of any additional offers and may be given the opportunity to either remove the contingency or match the new offer.

Deposit: A Hubbard Clause might involve a monetary deposit from the buyer, showing their commitment to the purchase. If the buyer fails to sell their existing property within the agreed-upon time frame, the seller may retain this deposit.

Benefits of Hubbard Clauses:

Flexibility for Buyers: Hubbard Clauses provide flexibility for buyers who want to secure a new property but are dependent on the sale of their current home. This can be particularly advantageous in competitive real estate markets.

Risk Mitigation for Sellers: Sellers may be more inclined to accept an offer with a Hubbard Clause if the potential buyer is offering favorable terms. The clause also allows sellers to continue marketing their property, providing a backup plan if the buyer fails to sell their home within the specified period.

Considerations and Challenges:

Clear Terms: It's crucial for both parties to clearly define the terms of the Hubbard Clause, including the specific time frame, notification process, and any financial implications.

Market Conditions: The effectiveness of a Hubbard Clause can be influenced by the state of the real estate market. In a seller's market, sellers may be less willing to entertain offers with contingencies.

 

Hubbard Clauses serve as a valuable tool in real estate transactions, bridging the gap for buyers who need to sell their existing property before acquiring a new one. As with any contractual agreement, open communication, transparency, and a clear understanding of the terms are essential for a successful and fair transaction for all parties involved.

Comments (1)

George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT
Your Connecticut Mortgage Expert

Rob McConville there are a lot of misconceptions about a Hubbard Clause, your blog does a good job of clarifying what a Hubbard Clause is.

Nov 29, 2023 11:00 AM