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Should You Buy or Sell a Home with a Hubbard Clause?

If you own your home, and wish to buy another home, but need to sell your home first in order to use the equity as a downpayment, or to be able to qualify for another mortgage, you may have heard the term “Hubbard Clause”. Sellers may have also heard this term as it refers to a buyers ability to purchase their home.

Many people grapple with whether they should sell the home they own first, or find the home that they wish to buy first, and then start the process of selling their home. In the case of the latter, the homeowner who wishes to purchase another home could consider placing an offer with a “Hubbard Clause” addendum.

A “Hubbard Clause” is a contingency in (or addendum to) a purchase agreement that expressly conditions the buyer’s offer upon their ability to sell and close on another home or property.

Think of it like “reserving a right to buy a particular property” while trying to sell the one you own, although in practice,  it’s a bit more complicated than that.

There really isn’t any statewide standardized  forms for a “Hubbard Clause” and this type of contingency  can or may include unique terms or conditions. The forms that we see most often tend to be much more regional in manner, or generated through independent franchises, and should include the following at a minimum:

1. Final Hubbard contingency sale date- That is, the deadline for the buyer to secure a purchaser for their home, so they can move forward with the sale on the home that they wish to purchase.

2. A deadline for the buyer to remove the “Hubbard” contingency if another offer comes in during this period.

Be forewarned, there are are a good number of agents who just do not like to work with Hubbard Clauses at all, and it doesn’t matter if their client is the buyer or the seller.

In my professional opinion, an offer should be considered even if it comes in with a Hubbard addendum. (It’s kind of like a back-up offer without having the main one.) As long as all the conditions and terms of the sale are acceptable and the home can still be marketed, it would be foolish not to entertain such an offer. When I represent the buyer, and if that’s the only way they feel comfortable moving forward, I believe it’s my fiduciary responsibility to help them get the house that they want.

Buyers: If your home is not already on the market, be prepared to do so THE SAME DAY that you place your offer in on the property that you wish to buy. You do not have to list it if the homeowner does not wish to entertain your offer, but if they are willing to negotiate with you, it is of extreme importance to be ready to go immediately. As an FYI, this is not the most cost effective way to purchase a home.

Sellers: There is not really a downside, as long as an acceptable Hubbard addendum allows you to continue to market the home as ACTIVE, and not change its status to anything else. Provisions must be made  for the instance of  another offer coming  in during the period that the Hubbard is in effect. Usually, giving a buyer a few business days to remove the Hubbard Clause is sufficient, so if they are comfortable removing the clause, you will sell it without the contingency, or if they cannot remove the Hubbard, that you are free to sell it to another party.

Each buyer and seller sitiation is different, as are the terms. It’s best to also consult with your attorney.


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Judy Szablak