72 Hour Clause: Everything You Need to Know
72-hour clause is a common provision to real estate contracts it allows a seller to continue marketing their property for a period of time after offer is made.3 min read
2. The 72-Hour Clause Step-by-Step
Updated November 3, 2020:
The 72-hour clause is a common provision added to real estate contracts that allows a seller to continue marketing their property for a period of time after an offer is made.
72-Hour Clauses and Property Purchase Agreements
Real estate contracts can be very complicated, often containing language that is hard to understand for people who don't have any legal experience. While reading real estate contracts, you may encounter something known as the 72-hour clause. People who are selling or buying property for the first time frequently misunderstand this clause, which can lead to a variety of problems.
For example, many people assume that this clause provides protection before buyer's remorse, meaning you would have 72 hours to back out of an agreement to buy a home. However, this isn't the case, and the 72-hour clause is actually meant to protect the person selling a piece of property.
In the past, making an offer on a home was linked to the buyer selling their existing home. Once an offer was accepted, the seller would take the property off the market for a certain amount of time to allow the buyer to sell their home. These time periods could be as long as eight weeks. Naturally, having to keep their property off the market for such a long period of time could be harmful to sellers, causing them to miss out on other offers.
The 72-hour clause is meant to prevent this problem for the seller. After an offer has been made, the seller can keep their property on the market. If they receive an unconditioned offer, which is one that is not linked to the sale of the buyer's home, the seller must notify the original buyer in writing. The buyer then has either 72 hours to unlink the purchase of the property to sell their home or leave the deal. Most sellers request that their real estate contract contains the 72-hour clause.
The 72-Hour Clause Step-by-Step
- The seller can accept a buyer's offer while still marketing their property.
- The seller receives another offer that they accept as a backup.
- With this backup offer in place, the seller contacts the original buyer about the new offer, activating an escape clause.
- The original buyer then has 72 hours to complete their purchase or back out and allow the second offer to take hold.
The 72-hour clause can be beneficial for both property sellers and buyers. For the seller, it can help them make a sale more quickly and may give them access to multiple offers. The buyer is protected because it eliminates the situation where they've sold their previous home only to find that the home they thought they were buying has been sold to another person. It's important to understand that while this clause is known as the 72-hour clause, the notification period can be whatever length the seller and buyer agree upon.
There are also several other names for this clause, including:
The goal of property sellers is to get the highest price they possibly can in a short amount of time. The sale of property is usually subject to something known as a suspensive condition. For example, one type of suspensive condition would be that the sale would be voided if the buyer is unable to acquire a bank loan in 14 days. Having this condition in place can be disadvantageous for the seller if a cash buyer or a pre-approved buyer makes an offer during this 14-day period.
Effectively, the potential buyer cannot purchase the home because of the existence of the suspensive condition. This can be extremely frustrating for the seller, especially if the cash buyer finds another property and the original buyer fails to acquire their loan, meaning the seller lost out on two potential sales. Adding a 72-hour clause to a contract can help reduce the seller's risk of missing out on beneficial offers for their property.
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