Legal Matters: Eyeing a new home? Some things you should know
If you’re in the market to purchase a new home, you may be wondering how you can contract to purchase that home when you need to sell your current home to qualify for a mortgage. That’s where a Hubbard Clause may be helpful to you.
By ensuring a Hubbard Clause is included, you can contract to buy a new home by making the purchase contingent upon the sale of your current home.
But how does this work? The Hubbard Clause typically states a date (at the agreement of both parties) by which you as the buyer must have a contract for your current home. During this time, the sellers are still able to market their property, but you can get first right of refusal. If the sellers get another offer during this period, you have a certain amount of time (determined at the agreement of all parties) at which point to respond.
Need a real life example? Let me introduce you to my client Daniel. Daniel was executor of his father’s estate and he wanted to sell his dad’s home in Westbrook. Daniel’s friends Jack and Rita had been looking for a home in Westbrook for over a year and as soon as they found out Daniel put the home on the market they offered to purchase from him.
The one dilemma, however, was that Jack and Rita would not be qualified for a mortgage on their new home as they had a large mortgage on their current home in Naugatuck. Therefore, they would need to find a buyer for their home before they could purchase their new dream home. After some discussion, the parties entered into a contract with a Hubbard Clause whereby Jack and Rita were required to put their house on the market immediately and had to enter into a contract to sell their current home within two months. During those two months, Daniel was still able market his father’s home and show the home to prospective purchasers. If he received an attractive offer, Daniel was required to make Jack and Rita aware of the offer and Jack and Rita had the first right of refusal to come up with a way to purchase the home.
In the end this arrangement benefitted all parties involved. Daniel continued to try to find a purchaser for the home, but Jack and Rita found a prospective buyer on their home within a month and a half of signing the contract with Daniel. Therefore, Jack and Rita were able to buy their dream home and Daniel was able to unload his father’s home.
Instead of waiting until you have a contract for the sale of your current home before entering a contract to buy your dreams home, you can act simultaneously with a Hubbard Clause. This is especially helpful when you’ve found the perfect new home and don’t want to miss the opportunity to buy it simply because you haven’t yet found a buyer for your current home.
Christina M. Accumanno, Esq., of Old Saybrook is an attorney with Brown Paindiris & Scott, LLP. Attorney Accumanno practices out of the firm’s Glastonbury and Deep River offices.
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