The basics of a Hubbard Clause are that it creates a conditional purchase and sales agreement on the sale of a property.  It usually has a term in which the buyer has the first right of refusal on a property.  In the event a seller receives another offer, the buyer must choose to release their Hubbard Clause and move forward with the purchase of the home or they must release their Hubbard and withdraw their offer.  This would allow the seller to sell the home to another buyer.

The nice part about a Hubbard Clause is that all terms are agreed to in advance.  With a little research on the property the buyers are using as the condition, a real estate agent can determine if the home is likely to sell or not at the price they have chosen to list the home.  The seller then knows that they have one potential and still has the property available to other buyers.  The seller may have a very slight decrease in showings, and other buyers that need to use Hubbard Clauses would be unlikely to write a back-up offer, however, they still remain a very common tool in real estate contracts.

There are two time frames in most Hubbard Clauses.  The first term is the length for which the buyer maintains the first right of refusal.  This can be any length of time.  One day or one year, it all depends on the motivations of both the buyers and sellers.  Once this date expires, the buyer usually needs to give notice if they are proceeding without the Hubbard Clause.  Buyers would request an extension on the clause or request a withdrawal of their offer due to the fact they have not received an offer.  The second term is the amount of time the buyer has to decide if they are going to move forward or not when another contract has been written.  This is usually a shorter period of time, and may vary with market conditions.

The most common reason for using a Hubbard Clause is that they cannot afford two homes at the same time and need a place to live.  If they sell their home first, they would not have a place to move in to.  If they try to purchase a home first, a bank may not qualify them for a mortgage.  You see this in a lot of New Construction Developments and residential sales.

Every Hubbard Clause can be adjusted or written very differently.  This is not a legal description of any one Hubbard Clause, but a description of the concept of its condition.  If you are considering using or accepting a Hubbard Clause in the next purchase or sale of a home, you should contact a real estate attorney in the area of the property.