Wording a 72-hour Clause

The release clause, kick-out clause, escape clause, first refusal clause, or 72-hour clause is intended to protect sellers against losing valuable marketing time, if they accept an offer to purchase, which is subject to a suspensive condition. But exactly how easily the seller will be able to accept an alternative offer to purchase will depend on how the 72-hour clause is worded.

"It is not what you say, but how you say it", is not true for real estate contracts. In contract clauses, it is WHAT you say that counts. And a few words here and there can change the way a contract clause functions dramatically. The 72-hour clause is no exception. So lets look at a few ways of saying "72-hour clause", which have markedly different meanings:

The Seller's 72-hour Clause

The seller wants to make it as easy as possible to accept a better offer to purchase. A better offer can mean extra money in the seller's pocket. So, the seller would go for the shortest possible performance period, the least complicated notification process, and to use his/her own judgement to determine whether a new offer to purchase is "better" than the first.

The seller could have all of this, provided that the wording of the 72-hour clause affords him/her those things:

Release Clause
The Seller shall have the right to keep marketing the property, and to receive alternative offers to purchase the property.
Should the Seller receive a bona fide offer to purchase the property from a third party, at any stage prior to the fulfilment of the suspensive conditions contained herein, which the seller considers more favourable than this offer to purchase, the Seller shall be entitled to accept such offer to purchase.
If the Seller accepts an alternative offer, the Seller shall notify the Buyer that the Release Clause has started to function immediately.
The Buyer shall then have 24 hours to fulfil all suspensive conditions contained in this offer to purchase. The Buyer has to commit within this time frame, to taking transfer of the property, free from said conditions. Failing compliance within 24 hours, this agreement of sale shall lapse and become null and void, and neither party shall have any claim against the other whatsoever.

The wording of this "72-hour" clause makes it very easy for the seller to accept a better offer to purchase the property, and makes it more likely that the first offer will become cancelled. If the second offer were not truly "better" than the first, the seller would still be able to allow the buyer an extension, to comply with the clause, if he/she so wishes.

Buyers' 72-hour clause

The buyers would like to protect their purchase of the property, even though there are suspensive conditions to the contract. It would be better for the buyer to side step the 72-hour clause totally, but that is not always possible.

A bona fide buyer will do his utmost to get the suspensive conditions fulfilled, so that the transfer of the property can proceed according to schedule. But a seller, who accepts a better offer, after having already "sold" the property to the buyer, may cause all this effort to be in vain.

So, the buyers would want to make things as hard as possible for the seller to cancel the contract, and give themselves as much time as possible to fulfil the suspensive conditions. In regards to the 72-hour clause, the buyer and seller is therefore on opposite sides of a great divide, and they will have to negotiate on the final wording of the 72-hour clause. But lets look at what the buyers' ideal in wording a 72-hour clause would be:

Release Clause
The Seller shall have the right to keep the property listed as "for sale" with the seller's real estate agent, and to receive alternative offers to purchase the property, but all public advertising of the property will be ceased, and "for sale" boards will be removed from public view, immediately upon accepting this offer.
Should the Seller receive a bona fide offer to purchase the property from a third party, which is unconditional and equals or exceeds the purchase price stated herein, at any stage prior to the fulfilment of the suspensive conditions contained herein, the Seller shall be entitled to accept such offer to purchase.
For purposes of this clause, an unconditional offer to purchase is an offer, which is not contingent on any suspensive condition whatsoever, and for which the buyer has obtained all guarantees as indicated in the offer to purchase.
If the Seller accepts an alternative offer, the Seller shall notify the Buyer immediately. The Release Clause will start to function as soon as the Buyer, in writing certifies receipt, of hand delivery of a signed copy of the unconditional offer to purchase, and the Buyer acknowledges in writing that it is, in fact, unconditional.
The Buyer shall then have 96 hours to fulfil all suspensive conditions contained in this offer to purchase. The Buyer has to commit to taking transfer of the property, within this time frame, free from said conditions. Failing compliance within 96 hours, this agreement of sale shall lapse and become null and void, and neither party shall have any claim whatsoever against the other.
This Release Clause will not come into effect before seven (7) days after acceptance by the seller, of this offer to purchase the property.

See how wording a 72-hour clause in a certain way makes it very hard for the seller to get the agreement of sale cancelled? The buyer conjures all kinds of hoops, which the seller has to jump through, in order to get the "72-hour" clause to start the clock.

Two of the sneakiest provisions in this clause, is the limitation of marketing, and the buyer's judgement of what exactly "unconditional" is. The seller is less likely to get a great offer without good marketing, and even if he does, the buyer can hold off on the start of his performance period, by requesting written proof of all the buyer's guarantees.

This 72-hour clause will also not come into effect before the buyer has had a week to get the ball rolling in fulfilling the suspensive conditions. So, this wording in a 72-hour clause is definitely advantageous to the buyer.

Real Estate Agents' 72-hour Clause

Incidentally, the "seller's wording" of the 72-hour clause should also be the preferred wording of for this clause, in the listing agent's offer to purchase document. The listing agent should represent the seller's best interest, which is to have the right to accept a better offer as easily as possible.

Unfortunately real estate agents often use contract clauses, which are not designed to protect the seller's interests as such, but rather to protect the real estate agent's commission. An open mandate, or a multi-listing mandate, unfortunately places the seller's real estate agent in competition with other real estate agents, to sell the property.

If a real estate agent submits an offer to purchase the property, which is contingent upon the sale of another property (or any other suspensive condition), an educated seller is likely to insist on the inclusion of a 72-hour clause. But if the real estate agent only has an open mandate, or an mls mandate, wording the 72-hour clause in such a way as to make it hard for the seller to accept a new offer, and to cancel the first offer to purchase, could protect the agent's sale, and the resultant commission. The agent might not intend to disadvantage the seller, but merely aim to make it as hard as possible for the agent's competition to muscle in on the transaction.

So, the seller's real estate agent may actually include a similarly worded 72-hour clause as a buyers' real estate agent would. Unfortunately, this "commission protection" the real estate agent builds into the wording of the 72-hour clause may be to the seller's disadvantage:

72-Hour Clause
The Seller shall have the right to keep marketing the property, and to receive alternative offers to purchase the property.
Should the Seller receive a bona fide offer to purchase the property from a third party, which is unconditional and equals or exceeds the purchase price stated herein, at any stage prior to the fulfilment of the suspensive conditions contained herein, the Seller shall be entitled to accept such offer to purchase.
For purposes of this clause, an unconditional offer to purchase is an offer, which is not contingent on any suspensive condition whatsoever, and for which the buyer has obtained all guarantees as indicated in the offer to purchase.
If the Seller accepts an alternative offer, the Seller shall immediately give written notice to the Buyer or the ABC Real Estate Agency. The Release Clause will start to function as soon as the ABC Real Estate Agency, in writing certifies receipt, of hand delivery of a signed copy of the unconditional offer to purchase, and the Principal of the ABC Real Estate Agency acknowledges in writing that it is, in fact, unconditional.
The Buyer shall then have 72 hours to fulfil all suspensive conditions contained in this offer to purchase. The Buyer has to commit to taking transfer of the property, within this time frame, free from said conditions. Failing compliance within the stated 72 hours, this agreement of sale shall lapse and become null and void, and neither party shall have any claim whatsoever against the other.
This Release Clause will not come into effect before seven (7) days after acceptance by the seller, of this offer to purchase the property.

Very much like the buyers' 72-hour clause, isn't it?