The 'escape clause' and how it works

As we looked at last week, [the sale-of-property condition] allows a buyer to make an offer on a property with a condition on selling their property, rather than waiting until they are sold.

Because selling a property can take longer than other conditions, such as mortgage or home inspection, a seller is often not keen on accepting this condition from a buyer.  After all, you're then stuck in a limbo of conditional sale until the buyer gets their own property sold. If they don't successfully sell and end up giving up, then you can find yourself without a buyer and a lot of wasted time.

The 'Escape Clause' is one thing that helps to mitigate this risk.  The standard wording from the Ontario Real Estate Association's clause library is:

Provided further that the Seller may continue to offer the property for sale and, in the event the Seller receives another Offer satisfactory to the Seller, the Seller may so notify the Buyer in writing by delivery to the Buyer personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto. The Buyer shall have <XX> hours from the giving of such notice to waive this condition by notice in writing delivered to the Seller personally or in accordance with any other provisions for the delivery of notice in this Agreement of Purchase and Sale or any Schedule thereto, failing which this Offer shall be null and void, and the Buyer's deposit shall be returned in full without deduction.

So the seller gets to continue to market their property for sale and potentially accept another offer from a different buyer (with a condition on the seller getting out of the previous sale).  If this happens, then the buyer will have "XX" hours from the time the seller gives them notice to either firm up or back out.  The time given varies, typically between 24 and 72 hours.  The seller naturally wants less time, the buyer wants more. I find 48 hours to be a pretty usual compromise. 

The buyer can waive their sale-of-property condition and enter into a firm sale.  The obvious risk is that you don't sell your house in time to close on the agreed [closing day].  This puts you into a breach of contract with all the related problems that brings. 

But the other way, you're backing out of the sale and letting the other buyer have it, with your deposit being returned just like any other condition falling through.  Not very attractive option, but better than not closing, not getting your deposit back, and getting sued for it.

In a situation like this, it is important to discuss your options with your real estate professional and maybe even your lawyer.