About Real Estate Contracts

“This offer is accepted subject to lawyer’s approval as to form and content by (state date and time).”

Usually give no more than 24 hours unless it’s a weekend and you anticipate a delay. If you don’t put this in the offer you could be in for a messy situation.

Subjects

Here’s where you need to pay attention.

Often times a buyer will want to add a subject to the offer. Assuming that you’ve already remembered to add the subject about having the offer approved by your lawyer (and they can state the same) here are some other types of subjects you may be requested to add.

‘Subject to Financing’

Clearly, if the owner isn’t coming with cash, they will need to have their financing approved. This is for everyone’s benefit. You do not want to have signed a deal to sell your home to someone with no money, and they should not be legally responsible for buying a home with no financing.

You cannot know for certain if the information your buyers have given you is correct. They may say their credit is good but until a bank agrees, you have no basis.

‘Subject to Inspector’s Report’

Your buyers may wish to have a third party investigate the house for structural problems or other unknown flaws. Some banks will also require a termite inspection before approving a mortgage.

‘Subject to Sale of Purchaser’s Home’ and ‘Subject to Parent’s Approval’

We will discuss the steps you should take to protect yourself from this one, but having these subjects are very risky.

Often (as stated before) parent’s will have a much different viewpoint than their children and you should probably hold off on writing the contract until all decision makers have viewed the property.

Subject to the sale of the buyer’s home is also a problem since you have no control on how long that will take.

The Escape Clause

There are plenty of other subjects that could be included, with these ones being the most common. However, you are not tied to that offer if you remember to add an escape clause.

The escape clause should go something like this: ‘The vendor holds the right to continue showing the property at (address here). If another offer is received, the purchaser will be notified and given 24 hours to waive the condition or the original agreement may be considered null and void’.

This is a very important detail. You are now free to continue showing your home to prospects and accept new offers. If an offer is made that does not have other subjects attached to it, you may accept the offer with your own ‘subject to original purchasers canceling contract’. You can then notify the first buyers and give them the required 24 hours to remove or satisfy their subjects before canceling the original contract and issuing the refund of the deposit.

How Long Should the Subjects Stand?

Your original subject should state the minimum 24 or 48 hours for both lawyers to be contacted and approve the contract. However, if you are subjecting the sale to financing, or an anticipated promotion, or another temporary setback, make sure to give as little time as necessary. Seven to ten days would be acceptable in most cases if the bank needs to make a property appraisal, only two or three if the subject is an inspection report.

If you give too much time there is the chance that the buyers will find another home or give in to buyer’s remorse and not complete the deal. Not only will this have wasted your time but is sure to break your spirit in your next attempt to sell. Keep things moving as quickly as possible.

Obviously other subjects (such as the sale of the buyer’s home) will not have a time frame, but you’ve protected yourself with the escape clause so you will not have to pass on a better offer if it comes through the door.

If you are waiting on a sale with subjects, do not take on new offers that have extensive subjects themselves. Perhaps it would be better to take the name and number of the prospects and tell them that you will alert them to any developments.