real estate investment

What is a Safety Clause?

By David Moore 24 June, 2023 2 mins read

A safety clause may be included in a contract when a realty broker helps you sell your home. This clause assures that they will still be paid for their work even if the house sells after the listing contract ends.

What is a Safety Clause and how does it work?

A protection clause (also known as a safety protection clause and an extender clause) is one of the most important components of a real property contract. This type of clause lays out a certain number of months after the listing agreement has expired during which the agent will still be eligible to receive a commission from a sale of your home that they helped facilitate through their marketing and listing efforts.

Each contract will have its own safety clause, so the details may differ from one another. However, most safety clauses last three days or longer. The length of time varies by contract and broker, but Harvey Jacobs of the Washington Post recommends a waiting period that lasts 30 days or less.

What does a safety clause do to prevent fraud?

A safety clause is a restriction that prevents a buyer contacting a seller directly and circumventing the listing broker. Collaboration is a type fraud, which can be extremely damaging for both the buyer as well as the real estate broker.

Does a Safety Clause always apply?

In the case where the exclusive right-to-sell listing applies, a safety agreement must be in effect when the buyer purchases the property after the agreement has expired. In order for the safety clause to be effective, the seller must be notified by the broker with the names of all buyers within a given timeframe after the house has been taken off the marketplace.

Can I take legal action if the other party does not follow through on their contract?

You don't want to make a deal that doesn't work out. You should always make sure you fully understand your contract, including the dates and timelines, before putting your home on the market.

Can I sue my agent for failing to do their job?

In many cases, sellers who have not received a sale since the expiration of the listing contract can file legal action against their agent. Barach says that this is especially true in cases where the agent failed to properly market or represent the seller’s best interest.

Are there safety provisions when I hire another broker?

In some cases, a seller will decide to hire a second broker after the original listing contract has expired. As long as the new broker includes a safety clause stating that if a buyer is brought into the brokerage by the previous broker, the broker will not owe the original broker any percentage of the commission.

FAQ

Is it better for me to rent or buy?

Renting is usually cheaper than buying a house. However, you should understand that rent is more affordable than buying a house. You also have the advantage of owning a home. You'll have greater control over your living environment.

What are the downsides to a fixed-rate loan?

Fixed-rate loans have higher initial fees than adjustable-rate ones. A steep loss could also occur if you sell your home before the term ends due to the difference in the sale price and outstanding balance.

How much will my home cost?

It depends on many factors such as the condition of the home and how long it has been on the marketplace. Zillow.com shows that the average home sells for $203,000 in the US. This

What's the time frame to get a loan approved?

It is dependent on many factors, such as your credit score and income level. Generally speaking, it takes around 30 days to get a mortgage approved.

Can I buy a house without having a down payment?

Yes! There are many programs that can help people who don’t have a lot of money to purchase a property. These programs include government-backed loans (FHA), VA loans, USDA loans, and conventional mortgages. For more information, visit our website.

How can you tell if your house is worth selling?

If you have an asking price that's too low, it could be because your home isn't priced correctly. If your asking price is significantly below the market value, there might not be enough interest. For more information on current market conditions, download our Home Value Report.

How do I calculate my rate of interest?

Market conditions can affect how interest rates change each day. In the last week, the average interest rate was 4.39%. Divide the length of your loan by the interest rates to calculate your interest rate. For example, if you finance $200,000 over 20 years at 5% per year, your interest rate is 0.05 x 20 1%, which equals ten basis points.

Statistics

10 years ago, homeownership was nearly 70%. (fortunebuilders.com)
Some experts hypothesize that rates will hit five percent by the second half of 2018, but there has been no official confirmation one way or the other. (fortunebuilders.com)
This seems to be a more popular trend as the U.S. Census Bureau reports the homeownership rate was around 65% last year. (fortunebuilders.com)
This means that all of your housing-related expenses each month do not exceed 43% of your monthly income. (fortunebuilders.com)
Private mortgage insurance may be required for conventional loans when the borrower puts less than 20% down.4 FHA loans are mortgage loans issued by private lenders and backed by the federal government. (investopedia.com)