In the most simplified of terms a Hubbard Clause means you make an offer on another home contingent on finding a qualified buyer for your existing home.  In other words, you need to sell to buy. 

A Hubbard Clause can seem like a panacea when you want to move but can’t afford to do so without the proceeds from your current home.  It also has the allure of convenience,  just moving into a usually bigger or better home with ease on the appointed day without the need for interim housing or unexpected delays.  In a hot real estate market sellers generally don’t entertain Hubbard Clauses because they don’t need to.  Sometimes a location, price or style of home dampens the enthusiasm for a property and a seller may consider accepting one if activity has not been as expected. 

Historically, I have not discouraged sellers from accepting a Hubbard Clause after I have thoroughly assessed the other conditions in the contract such as, the buyer’s qualifications, the pricing and viability of the buyer’s home and after evaluating the current interest in the seller’s property.  However, in this age of abundance of cash buyers buying in Northeast Connecticut I would discourage a buyer from using this method of purchasing a home unless they and their agent have a thorough understanding of the contract and the potential outcomes. Here a cautionary tale for you to consider: 

Imagine  as a buyer you have a house under contract with a Hubbard Clause and things are proceeding according to plan.  Your mortgage is in underwriting, you’ve completed your home inspections, the appraisal has just been ordered, the buyer for your soon-to-be former home is on track for their mortgage commitment and your agent is communicating regularly with the seller’s agent.  Everyone agrees that the transaction is going along smoothly.  Sounds perfect right? 

You drive your in-laws over to the property to show them your new home and there are 2 cars in the driveway.  A real estate agent showing the property to a potential buyer.  Why?  Because of the Hubbard status the property is still available for sale to other buyers.  A Hubbard Clause allows the seller to have a bird in the hand while also remaining for sale to other more qualified prospects. 

 Now let’s say the buyer in the driveway is a cash buyer with no home to sell who makes a full price offer, no inspections, close in 30 days.  At this point the seller wants to accept the new and better offer which forces you, as agreed in the contract, to remove your Hubbard Clause and to proceed with a closing to keep the property.  Remove meaning you proceed with the purchase without selling.   You can’t do that.  You’re not qualified to buy without the sale of your home.  Your buyer’s mortgage commitment isn’t due for 2 weeks and no one can guarantee it.  This new buyer has bested your offer and according to the terms of the contract you must remove your Hubbard Clause and the new buyer proceeds.  

This scenario happened twice recently in transactions where I represented the seller and the first time in over 30 years where buyers were nearly to a closing date and a new and well qualified buyer appeared.  One of the transactions ended badly for the buyer with the sale to the cash buyer proceeding and the original buyers losing the property. 

In the other transaction the seller decided to honor the aforementioned good faith put forth by the buyers and their agent and agreed to a modification to the contract that would allow them to proceed, refusing the cash offer even though it was for substantially more money.  So, there is no way of predicting the outcome of these transactions.  Make sure you and your agent understand the nuances of all contracts and the risks and benefits of any offer containing a Hubbard Clause.