What is meant by “a time clause offer”?
Sometimes when making arrangements to view a property with your REALTOR® you’ll hear that a property you want to view has “a time clause offer”. Often this will be followed by the question, “Would you still like to view this property?” Understanding what a time clause is can help with deciding how to proceed.
A time clause offer is an offer to purchase a particular home that is subject to the sale of a different property, usually the buyer’s home. The wording of this clause can vary on every contract and generally it involves “a time clause”, which specifies that if the seller is presented with a second offer, then the buyers with the first offer would have a set period of time to remove all of their subjects and agree to purchase the home, or decline to remove subjects and remove their offer to purchase. If the first buyers decline to remove all subjects and remove their offer, then the second offer would take precedence. The second offer on the home that caused the time clause to be invoked is colloquially referred to as having “bumped” the time clause. Generally speaking, a time clause offer has a longer term to remove subjects than a non-time clause offer.
Why would someone offer with a time clause (subject to the sale of another property)?
There are many reasons why a buyer would want to put in a time clause offer. A few examples include: financing, the buyer requires the funds from the sale of their home to purchase the new home or would like to manage their investments and money by utilizing a time clause offer; fear, wanting to find their new home prior to leaving their old home, or that the home they found and fell in love with won’t still be on the market once their home sells. It is important to note that a REALTORS® advice can be invaluable when deciding whether to first sell your home before looking at property, or whether to find a property first with time clause intentions. The REALTORS® advice is different for every buyer based on their personal situation and current market conditions.
Why would a seller accept a time clause offer?
There are many reasons why a seller would choose to accept a time clause offer. A few examples include: the offer is attractive to the seller, either money, dates, or conditions are favourable to the seller; market conditions, in a buyers’ market time clause offers are more prevalent than in a sellers’ market. Generally speaking, a seller would be looking for a very attractive offer before agreeing to have their property under offer for a longer time period. A REALTORS® advice can be invaluable when deciding whether to accept a time clause offer, and that advice is different for every seller based on their personal situation and current market conditions.
Why would a second buyer “bump” a time clause offer?
Usually, buyers are encouraged to view properties that have a time clause offer because there is still a chance for the second buyer to purchase that property. It does, however, involve putting an offer on the property, and then waiting the time period specified in the time clause before knowing whether their offer will take precedence. Usually this time period is 24, 48, or 72 hours, however, this is a matter of negotiation between the seller and the first buyer and the time period can vary. During the time period that the second buyer is waiting, they should not put an offer in on another property until they know whether their first offer has been accepted or not. It could be financially ruinous if both offers were to be accepted. Just because a time clause has been bumped, does not mean the first offer will automatically collapse. The first buyers have that time period to determine if they wish to remove all of their subjects and make the offer firm, or if they wish to release their offer. Someone is always going to be disappointed in a time clause situation where the time clause gets called. Either the first buyer or the second buyer is not going to get the house they both fell in love with.
Having Rebecca Ryane REALTOR® provide advice in these situations can be incredibly valuable. The details in time clauses vary on each contract, so it’s important to read all contracts carefully and have expert advice to assist you with your purchase or sale.