Real Estate Insights: What Is a Hubbard Clause?

David Deem

By Robin Kencel

Is your property on the market and you're hopeful you'll soon have an offer? Perhaps you've accepted an offer on your home and are working towards an executed contract, or even have a signed contract and are working through contingencies. In these situations, you're likely looking for your next home, and may have already found exactly what you're looking for. Now what?

This recently happened with one of my clients in Greenwich, Conn. The client was shopping for a home, while their current home was being sold. Like many in this situation, my clients found a home they loved in a terrific location.

The bid that we presented reflected our understanding of the appeal of the property and our conditions were clean: 20-day mortgage contingency (low because of the preapproval that my buyers had received and their strong relationship with the bank), building inspection, 60 days to closing and the presence of a Hubbard clause. 

What is a Hubbard clause? A Hubbard clause basically states that if a buyer's buyer does not get to a contingent-free contract, they can exit the contract. As you might expect, many sellers aren't fond of Hubbard clauses, as they're a large variable. Rather than give up, we did the following:

Stayed in close communication with the seller. 
We were upfront about the situation, the timing of our buyer's approval process and provided as much as we felt comfortable with about the building and the contract status to give the seller of the new property information that would increase their comfort level.

Looked for alternative solutions to reduce risk. These included proposing:
A rent-to-buy option with a five-month out closing date, giving my buyers adequate time to find another buyer, should the one in hand not go through.
Going to contract and allowing the seller to continue to show the property with a right of first refusal for my clients should another offer come in.
Have a gift or loan from a family member in the wings available to use on a short-term basis to cover the 20 percent down payment should my client's current home not sell prior to their new closing date.
Stayed organized, positive and as accommodating as we could, within the confines of the Hubbard situation.

Real estate might be about an asset, but when it's being traded, the human component plays a huge role. Being solutions-based and collaborative are tools that are available and valuable.



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