What is a 48-hour clause?

BY SCOTT MOORE, REALTOR

You send your realtor a text – “Hey, can we see 123 Main St tomorrow, it looks great!”

The answer comes back – “Sure thing, but it has a 48-hour clause on it, do you know what that is?”

Of course, you don’t know what that is!

A 48-hour clause (or a time clause) is not very common in Winnipeg real estate, but we do come across it a couple of times a year. When you’re trying to buy a house that has one, it’s really important to understand how it works. 

When there is a 48-hour clause in place, the owners of the house have accepted an offer from a buyer, but there is an unusual condition on the offer that will take some time to satisfy. Ninety-nine percent of the time, the condition is subject to the sale of the buyer’s home.  

Common conditions like subject to the buyer arranging financing, or subject to a home inspection can usually be satisfied in a matter of days, so it would be really unusual to see a 48-hour clause for these types of conditions.

Because the sale of the buyer’s home needs a couple of weeks, or even a month or two to accomplish, vendors will often ask for a time clause (usually 48-hours, but can be 24-hours or even 12-hours—really, any period of time). This means that they can still market the home and they can still accept offers.

When there is a 48-hour clause in place, if the seller receives a second offer that they like, once the second offer is unconditional — either from the outset or once the new buyer’s conditions are met — then the vendor goes back to the original buyer and gives them 48-hours notice to decide whether they will waive their condition and buy the home, or not satisfy their condition and cancel the deal.

If they waive the condition, the first buyer gets the home. But if they cancel the deal, the second buyer gets the home.

In this market, vendors will usually only accept offers subject to the sale of a buyer’s home when there is a limited pool of buyers for the home — like with rural properties, farms, and properties with a high price tag. We do sometimes see it in off-market transactions as well, where the process can be a little more cooperative. Of course, if the market shifted to a buyer’s market then we would see more of this, but for the time being it’s not that common.

Probably the last, and most important question you have is: “what will happen once the first buyer gets the notice?”

My experience is that people are usually pretty clear on whether they can move forward without selling the home first, so we usually get an answer back within a few hours as to whether the first buyer is moving forward or backing away. As for what the first buyer is likely to do – it’s honestly very hard to predict as it depends on the first buyer’s unique situation.

If they literally cannot buy the home without selling their house first, or if they haven’t even had time to list their house yet, they will probably cancel the deal. On the other hand, if the home is listed, they are probably pretty invested in the purchase by this point, and might be more willing to take the gamble.

Bottom line, this is one of the less common situations you can come across in real estate, but whether you’re a buyer or a seller, you need a realtor that is experienced and knowledgeable about even the uncommon aspects of real estate to help you figure out the best strategy for you.

At The Moore Group, we can do that for you. Message us anytime for advice about buying or selling real estate in Winnipeg.