What is a Time Clause
A “Time Clause” allows the seller to still market a property because the buyer has a condition that must be met prior to purchasing the home. The addendum lists four conditions: Due Diligence, Financing & Appraisal, Subject to the Sale of Buyer’s Residence, and Other.
In almost every case where the time clause is used, the agent will use this addendum for the “subject to the sale of buyer’s residence condition.”
Scenario
Here’s where it gets tricky. Let’s suppose a buyer writes an offer and has the Due Diligence Deadline as December 27, 2018 and the Financing Deadline as January 3, 2019 with closing taking place on January 17, 2019. The buyer did disclose in section 2.2 of the REPC that the buyer needs to sell a home and added the subject to sale of buyer's property addendum.
The listing agent then talks with her client and they decide to use the Time Clause Addendum. The agents intent is that if another buyer comes along they can take that new offer if the seller so desires. The agent marks the “subject to the sale of buyer’s residence condition" checkbox.
Do you see the problem with this yet?
Buyer accepts the addendum. A week later the seller receives a cash offer and want move forward with the new offer. They give notification to the Buyer that they have a new offer and the buyer has 48 hours to remove the subject to the Sale of Buyers residence condition.
Buyer, does not have his home under contract but he agrees to remove this condition. Why?
The listing agent made a critical error and did not mark all the condition boxes (due diligence, financing & appraisal, and subject to the sale of buyer’s residence). The buyer has removed the one contingency but can still cancel the contract based off of due diligence until December 27th and based off of financing until January 3rd. This essentially allows the buyer to tie up the property for nearly an additional month while trying to get his home sold and still protect his earnest money.
It sounds unfair, but this was the listing agents error. Listing agent did not provide reasonable care to the seller.
IF YOU USE THE TIME CLAUSE. ALWAYS MARK EVERY CONDITION WHEN YOU REPRESENT THE SELLER! This way if they buyer does decide to proceed the earnest money is immediately non refundable to the Buyer.