The Escape Clause

What does it all Mean?

So, what is an escape clause when it comes to selling your house for sale by owner? Well what it isn't, is a special clause standing on it's own.

It can appear in various clauses in your real estate contract. It could be used:

• In a building inspection clause.
• A mortgage financing clause.
• A Subject to Lawyer Approval clause.
• A subject to a third party giving their stamp of approval.
• Almost any inserted written clause in a real estate contract.

Lets Look at the Building Inspection "Escape" Clause

OK. You receive an offer to purchase from a buyer and everyone has agreed on the price and terms and signed the contract.

The building inspection is probably one of the most common and easiest escape clause that a buyer can use to turn tail and escape into the sunset.

This Offer is subject to the Buyer(s)having a full property inspection by a qualified property inspector of the buyer's choice and at the buyer's expense, on or before the 4th day of May, 2011 by 3:00 pm. If the buyer is not satisfied with said inspection, the buyer shall notify the seller or the seller's solicitor, in writing, on or before the 4th day of May, 2011 by 3:00pm. Upon said written notification, this Contract shall be declared Null and Void and the buyer's deposit shall be returned in full without interest or penalty. This clause is for the sole benefit of the buyer(s) and can be waived by the buyer. If no written notification is given to the seller, or the seller's lawyer, on or before the 4th day of May, 2011, this clause shall be deemed satisfied.

The clause above is just written as it comes out of my "thinking box". A building inspection clause written in a contract you receive, may be totally different.

Here is another definition of an Escape Clause, from a different website.

The Big Escape

"not satisfied with said inspection"

With this escape clause, how do you decide what is satisfactory or unsatisfactory to an individual? Answer: You can't.

I might be satisfied if the basement is under 3 feet of water 4 months of the year.

I could be unsatisfied, or use as an escape, if the grade of the land was not to my liking or if the basement windows were over 3 years old.

The water pressure could be just a bit under the pressure I'd like, or the hardwood floors might have a few squeaks when you walk on them. Sorry, using the escape clause.

You see where the problem lies? In the clause above, the purchaser doesn't even have to tell you what is wrong. Nope.

Just notify your lawyer, declare null and void, get their deposit back and go buy that other house they saw after they signed your contract.

This is actually what happens from time to time and why it's called an escape clause. The purchaser got cold feet, found another property he or she liked better, or some other "escape" excuse.

What can You Do?
When Used as an Escape Clause

Frankly at this point not much. Ahead of time, a few things. Here they are in random order on how to make an escape clause either less painful, or even save the deal:

• Always, Always, make the building inspections to be done in as short of period of time as possible. If you can, have the purchaser call the building inspector they are going to use before you even sign the contract. If the inspector can come the next day, give them 3 days to complete. One day for the inspection, and two days for the report to be written up and a chance for the purchaser to review.
• Try to include that the purchaser will inform you of any defects and the seller shall have the option to repair the problem in a workmanlike or professional manner on or "before ......" in the building inspection clause.

You could also offer an allowance of $xxx to the purchaser for them to repair. A good example may be roof shingles, whereas you offer the purchaser $4000.00 to shingle the roof and the buyer is thinking, "Hey, I'll take the $4,000.00 and do the job myself with a couple of my buddies for $2,000.00.

• You can change the wording from satisfactory, to any major defects. This is tricky. Who decides what is major or minor? The only difference is "major defect" sounds stronger and more defined than a loose "satisfactory to the buyer."

From personal experience and having gone through extensive writing and rewriting and running the results past the real estate board members and real estate lawyers, to make the building inspection clause tighter, the best solution, was make it quite loose, but give it a short time frame.

If a buyer wants out because they changed their mind and they use the building inspection as an escape clause, you will probably be out of luck. At least if this happens to you, it will only be a 3 day penalty of holding up the sale of your house.

Note: Something always amazed me, when I was a Realtor® . When there was an unsatisfactory report on a property, the buyer was always very reluctant to give the seller the report. Why??? I don't know.

The only reason to keep the report, was because the buyer in most cases paid for that report.

What value is it to the buyer? Nothing! If they aren't buying the house, it has ZERO value.

The seller could use that report to improve their property for the next offer. I guess it's just human nature. Sigh!

So, if you are a buyer and not going to purchase the property because of a failed inspection, be a nice person and give the report to the seller please. At least allow them to photo-copy the results. Thank-you.

You could take one more step when the building inspection clause was being drafted. Include in the clause that if the building inspection is unsatisfactory, the buyer will give the report to the seller at no expense to the seller.

If All Else Fails

If there really is a major defect that perhaps you weren't even aware of, you can always try to go back to the drawing table.

• Try to renegotiate on the price and or terms.
• Offer to have the problem repaired by professionals in that particular field.
• Cry and wail, rant and rave, until the buyer feels sorry for you. Just kidding. This is a heavy subject so I thought I'd try a stab at some humor. :-)

Bottom Line?

Don't be to quick to throw in the towel, if someone does the big escape. If this happens to you, I don't mind if you go to my Contact Me Page and explain the situation and I'll try to give you some suggestions. Sometimes though, there is absolutely nothing you can do to save the deal.

This is especially true if the buyer went out looking again and found a property he or she or they liked better. The buyer just uses the report as an escape clause.

One more time: Keep the time limit as short as possible while being fair to the buyer.

For More Information about Satisfying Clauses

Subject to Financing Clauses

Fixtures and Chattel Clauses

Subject to Parent Approval Clauses

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