Unless you’re well-versed in legalese, you may have a hard time wading through all the technical jargon and industry lingo that are typically included in a real estate contract. One phrase you may have come across in your reading is “72-hour clause.”, in Alberta it is called the "Sale of Buyer's home Condition, which now makes it a lot clearer than before, but many people still know it as the 72 hour clause. Perhaps you’ve seen variations of this, such as escape clause, hedge clause, kick-out clause, release clause or right of first refusal clause. Enough with the clauses already, you say. But these clauses may be the only things that stand between you and disaster! Okay, that may be overstating. Let’s start with what this clause is not. Some people mistakenly believe that the 72-hour clause is a buyer’s remorse protection, as in you buy a house and you have 72 hours in which to change your mind and give the house back. That’s not what it is. Let us explain. The sale of buyers home condition works like this: it is put in a contract to give a house seller the opportunity to accept a contingency offer while still marketing the house to other potential buyers. Let’s say that in order to buy a new house, you must sell your current residence first (most people are like that, so don’t feel bad). So you put down an offer on a house contingent on the sale of your current house. Easy enough. But then let’s say another buyer comes along, one who can buy the house outright without waiting for another house to sell. That buyer puts an offer on the house you’ve already put an offer on. Here comes the 72-hour part or how many hours you and the seller agreed to in the contract, to either sell your house and close on it or come up with a bridge loan or win Lottery to get that house. Who does this clause protect? The seller. If the seller is forced to take the house off the market in the dim hope that your house will sell, they’re closing the door on buyers who potentially could buy the house today—not at some unspecified time in the future. As an added bonus, the buyer, knowing that her dream house is within her grasp but still on the market, has added incentive to stage the house, work on curb appeal and make sure that the marketing is the best it can be. When the seller and buyer agree to have a Sale of Buyers Home Condition in the contract, a Sale of Buyers Property Schedule must form part of the contract. This schedule outlines the terms of the condition. Example: Line 1.5 in the AREA Schedule states that "until the buyer provides written notice of waiver or satisfaction of all buyer conditions in this contract, the seller may: (i) continue to market the property; (ii) authorize the seller's brokerage to disclose the existence of this Sale of Buyer's Property Condition and the time allowed for buyer waiver below; and (iii) accept another offer purchase contract that may contain buyer conditions. Let me explain a couple of points....the buyer agrees that all the conditions must be waived or satisfied before the clause is off, yes this means that if the buyer succeeds in selling the house they aren't totally out of the woods yet, they still have to remove any other conditions still on the contract, the seller can still enact the clause if another offer comes in. And no, the sellers brokerage can not disclose the amount of the existing offer. Under Alberta real estate, price and motivation are never to be disclosed without written consent. Another tid bit, even without a sale of buyers home condition and time clause, a seller can still market the home and accept back-up offers on their home if there are still conditions, they just have to wait the conditions out, if the buyer fails to satisfy their condition, the new buyers offer comes into play.
What is a 72-hour clause?
Jan 21, 2019