What is a Hubbard Clause In a Real Estate Transaction?

A Hubbard clause is an addendum or rider to a residential real estate purchase agreement. It makes the purchase contingent upon the buyer selling their own home first. It’s important you hire an attorney familiar with how they work and the potential pitfalls. They are becoming more common in Fairfield County. They come in many different forms, but the standard terms are:

• The Buyer may get out of the contract and get their deposit back if they don’t have a contingency-free, fully executed contract by a particular date.
• The Seller shall have the right to keep the property on the market and solicit and negotiate other offers as long as the Hubbard is in effect. However, the seller must notify prospective buyers of the existence of the contract and Hubbard Clause.
• If another Buyer makes an offer, the original Hubbard Buyer shall have three days to release the Hubbard clause and meet the new Buyer’s offer if the new Buyer’s offer is higher.

If you are the Buyer, the Hubbard Clause has the benefit of allowing you to commit to the seller without fully committing until your home is sold. If you are the Seller, the Hubbard Clause allows you to lock in an interested buyer, as long as they can sell their home.

The Challenge of a Hubbard Clause

The challenge is dependent on the sale of the Buyer’s house. The seller has no control over how the Buyer’s home is priced or shown. It is recommended that the Seller take a hard look at the marketability of the Buyer’s property before entering into a Hubbard Clause agreement.

When is the Hubbard Released?

Traditionally, a Hubbard is released once the Buyer has a valid, fully-executed contract to sell their home without a mortgage contingency. In releasing the Hubbard, it is also often necessary for the Buyer and Seller to agree upon a closing date that syncs up with the Buyer’s Sale.

A Hubbard Clause is an effective tool that doesn’t come with much risk for either side. The one exception is when Buyers seek to rent the home before closing. Any occupancy by the Buyer before a real estate closing can be complicated. It can lead to unintended issues at the closing table. Hubbard buyers, however, should absolutely not be allowed to occupy the premises before closing. If the Buyer’s home doesn’t sell, it becomes incredibly more difficult for the Seller to move on to a different Buyer if the Hubbard Buyer is living in the property.