You’re buying a home and the seller has just asked you to “waive the 48-hour clause”.
Unless you pay attention to the fine print, you may have skipped right past this all-important condition. Agreements of purchase and sale, particularly in hot markets like the Greater Toronto Area, can include clauses giving sellers the liberty of walking away.
If you sign without having a lawyer review your offer to purchase, you could be forced to commit to purchasing what could be your biggest investment before you are ready. Or give up on a home you really want.
Time is running out. You have 48 hours to decide.
Why Include a 48-Hour Clause
Multiple property bids put pressure on buyers and sellers. When interest rates are low or markets are soaring, sellers often don’t want to wait a week or more for buyers to arrange a house inspection or firm up mortgage financing.
You could be talked into or, worse yet, overlook conditions that disadvantage you as a buyer. Making a firm, irrevocable offer can be perilous.
48-hour clauses are common in Ontario. You don’t have to agree to include them. But the question is: how desperate are you to own a home?
Escape Clauses in Insurance Policies
You’ve probably heard the phrase “escape clause” before in insurance policies. That’s the fine print where your insurer escapes liability for “other insurance” coverage. For example, a home insurer may cover only those costs that exceed government compensation for a weather-related disaster.
What is the Escape Clause in Real Estate?
The seller receives an offer they like better. They email or write you to request that you lift all sales conditions in the next 48 hours or move on. The clock is ticking on whether you want to firm up the agreement of purchase and sale or ask for your buyer’s deposit back. Once you agree to a 48-hour clause, you’re usually tied to making a quick decision.
An escape clause in a contract allows the parties to terminate an agreement under certain conditions. Sold conditionally with an escape clause in a MLS listing may mean the seller is under pressure to sell, or prefers firm offers with no conditions. While they accept conditional offers, your ability to take the time you need to feel comfortable buying your home could be compromised.
Escape Clause Economics in Real Estate
Escape clauses are usually written to benefit a property seller. But just as sellers can use escape clauses to accept better offers, buyers can also make escape clause economics work to their advantage.
Escape clauses in real estate contracts can be amended by buyers to force sellers to only accept specific offers. For instance, you might have your real estate lawyer redraft the escape clause to stipulate:
- that the seller:accept only firm offers, limiting the number of offers they entertain
- that only offers over a specific amount qualify for the escape clause
- or that the buyer can use an escape clause to recover their deposit if their financing falls through.
Just remember you will need to strictly follow the contractual terms to avoid paying damages, and the other parties’ legal fees, if anything goes wrong with the escape clause.
What Can Go Wrong With Trigger Clauses
Anything or everything.
Conditions That Make it Difficult on Buyers
Hyper real estate markets can make sellers anxious. When your offer to purchase has a “conditional on sale of existing home” clause or conditional terms of any kind, it can bind a seller’s hands for weeks. Sellers may try to abandon the sale when a better offer comes along and it will! Take note: conditional sales are not firm and binding until the buyer and seller mutually agree to waive all conditions.
You may be surprised to know how often conditional sales fall through.
Mortgage Approval Finangling
If this is your first home, you may need extra time to finalize preapproved mortgages.
Pre-approved funding is not always firm. Regardless of how much you saved or how strong your credit rating may be, getting a mortgage can take days to weeks — especially when you apply for a high-ratio mortgage, with less than 20 per cent down. Financial stress tests can stress out the best of us.
You get the picture. A 48-hour clause places you at a distinct disadvantage if you are paying anything other than cash.
Axess Law navigates what to do if you have to cancel.
Fussing Over Mortgage Terms
You may want to transfer a portable mortgage to your new home, but find that’s not possible because of the gap between a current mortgage and your new lending terms. Taking your time gives you options to arrange financing in a way that suits you best. A 48-hour clause robs you of that luxury.
Skipping Home Inspections
Home inspections are essential in Ontario. Mould, termites, frost heave or abandoned oil tanks on your property reduce the value of a home or land. You could be facing costly repairs when you buy sight unseen.
Rightfully, the seller should pay to fix problems your home inspector finds or at least acknowledge costs you face when you purchase a faulty home. Buying without a home inspection can leave you financially devastated, even if defects are latent — meaning not even an inspector could visibly see them.
Be careful how you word home inspection clauses.
Axess Law negotiates with sellers when home inspections reveal problems. We check the seller property information statement (SPIS) and ask for solutions or your buyer’s deposit back.
High Water Havoc
It’s been a chaotic and expensive year for fires and floods. Make sure your home is not on a floodplain or wildfire path by having Axess Law review the property survey from a land titles office. Your ability to get the mandatory fire insurance binder on time could depend on a home’s history of fire or flooding problems. Being rushed into buying a home could cost you now, for higher insurance premiums, or cost you later.
Why you need a fire insurance binder.
Why You Need a Lawyer
Axess Law real estate lawyers (Toronto, Greater Toronto Area or Ottawa) review agreements of purchase and sale for clauses and conditions you may not realize impact your ability to close a sales transaction on your own terms.
Our licensed, professional lawyers negotiate with the seller’s attorney on your behalf. We prepare amendments that hopefully give you the time you need for due diligence checks, like home inspections or reviewing condominium corporation strata certificates. When you need to cancel for any reason, we ask for your full deposit back or explain why not.
If something is seriously wrong with a home, we revise the agreement of purchase and sale to adjust the price or request the seller to make minor repairs at their own expense.
Axess Law answers all your questions — see the most common questions you ask us — like what happens to the deposit when buying a house.
You receive a final statement of adjustments showing your costs to purchase the home and pay expenses like legal fees. Read if a real estate deal falls through who gets the deposit.
Savings When You Need Them
Axess Law has affordable legal services — virtual by video conferencing online from anywhere in Ontario or in person at any Ottawa or Greater Toronto Area Axess Law locations. Our virtual real estate closings software is secure and confidential. We make e-signing easy!
We know buying a home is a major purchase. We keep our flat fee legal rates modest, to fit any budget. You pay just $999.99 and up plus HST to buy a home or condo or $799.99 and up plus HST for home sellers.
Book Appointments Online or By Phone Today
Dial our 1-647-479-0118 lawyer line or toll free to 877-402-4207 to make appointments for real estate closings or for an amendment to agreements of purchase and sale. Booking online saves time. It’s quick and easy to do. We have onsite and transit access nearby.