Quick Summary: An escape clause allows a seller to accept a competing offer even after signing a conditional agreement with another buyer. The original buyer gets a short window (usually 48 hours) to firm up or walk away. On MLS listings, “SCE” means Sold Conditional with Escape.
What is an Escape Clause?
An escape clause is a contractual provision that lets the seller continue marketing the property after accepting a conditional offer. If a competing offer comes in that meets certain criteria, the seller can invoke the clause. The original buyer then has a set timeframe to remove their conditions. If they cannot, the seller is free to accept the new offer.
In Ontario, conditions are typically controlled by the buyer. After signing, the seller has little room to back out. The buyer, however, can walk away and have their deposit returned. An escape clause balances this by giving the seller an exit route under specific circumstances.
This may sound like a tool for sellers to renege on deals. Why would a buyer agree to invest in an appraisal and inspection only to have the rug pulled at the last minute? The answer is that escape clauses, when drafted correctly, benefit both parties. They allow buyers to make conditional offers that sellers would otherwise reject outright.
SC vs SCE: What Buyers Need to Know
If you have been browsing MLS listings and noticed status codes like SC or SCE, here is what they mean.
Decoding the MLS status
SC stands for Sold Conditional. This means the seller has accepted an offer, but that offer includes conditions such as financing approval or a home inspection. The deal is not yet firm. However, the Seller cannot back out of this agreement, and must be reliant on the Buyer to terminate the deal.
SCE stands for Sold Conditional with Escape. The “E” makes all the difference. An SC escape clause means the seller has the right to continue marketing the property and, under certain circumstances, accept a competing offer. The existing buyer is not fully locked in.
Why SCE listings are worth watching
Most buyers filter out conditional listings when searching, assuming those properties are off the market. But an SCE listing is not fully committed. If you find a property marked SCE that you love, it may still be worth pursuing.
You can ask your agent about the terms. In many cases, submitting a strong offer can trigger the escape clause, forcing the original buyer to make a decision. If they cannot firm up in time, the property could be yours.
Timing matters
When an escape clause is triggered, the original buyer typically has 24 to 72 hours to remove their conditions. The 48 hour escape clause is most common in Ontario.
If you are considering submitting an offer on an SCE property, be ready to move quickly. Have your financing pre approved. Be flexible on inspections if necessary. And do not lowball. You are competing against an existing conditional buyer who already has an accepted offer.
An Illustrative Example
Let’s suppose a buyer is desirous in purchasing a property on the market. The Buyer feels confident they will have the necessary financing to complete the transaction, but will not know for certain until completion of their prior project in 4 months. The Buyer could submit an offer with a 4 month financing condition. The Seller, however, would likely reject this offer. Why would the owner of a property wish to commit to the sale for 120 days, with the chance that they will be met with a mutual release and no recourse against the Buyer? The seller could have spent this time marketing the property and finding the correct buyer who is more qualified and financed.
It is in this situation that an escape clause could prove useful for both parties. For example, a clause in the agreement may read similar to:
“The Buyer agrees to allow the Seller to continue to market the property as available. If the Seller is presented with a bona fide, unconditional offer to purchase this property at a price not less than X, the Seller may choose, at their sole and absolute discretion, to render this agreement null and void and the deposit shall be returned in full to the Buyer without interest or Deduction.”
In this case, the Buyer has right to purchase the property unless a very specific better offer materializes. The Seller may be more obliged to accept this agreement, where their property is not tied in a contract during a hot selling season. The Buyer benefits by not allowing the rug to be unceremoniously pulled from underneath them…the criteria for the competing offer is clear.
It’s important to note that Escape Clauses do not need to have a unilateral termination component by the Seller. For example, you could modify the above clause to read “Conditional Period shall be twenty-four (24) hours following receipt of an offer”. In This example, the original Buyer would have 24 hours to waive conditions, or walk away from the deal.
Escape Clause Strategy: Buyer vs Seller
An escape clause in real estate is a tool that benefits both parties when used correctly. Understanding when to use one (as a seller) or accept one (as a buyer) can give you a strategic advantage.
For Sellers: When to Insist on an Escape Clause
As a seller, you should consider adding an escape clause when the buyer needs an extended condition period, typically 30 days or more. This is especially relevant when the buyer’s offer is conditional on the sale of their own home, which could take months.
An escape clause protects you from being tied up with an uncertain buyer. You can continue marketing the property, accept showings, and entertain other offers. If a stronger offer comes in, you have a path forward. Without the escape clause, you would be locked into a conditional agreement with no recourse.
Escape clauses make the most sense when the market is active and other buyers are likely. If your property is in high demand, there is little reason to commit fully to a conditional offer.
For Buyers: When to Accept an Escape Clause
From a buyer’s perspective, accepting an escape clause is a tradeoff. You are giving the seller flexibility in exchange for getting your conditional offer accepted.
This tradeoff makes sense when you need a longer condition period, such as 60 days to sell your current home. It also makes sense when the property is unique or hard to replace. If you walk away, you may not find another like it. Finally, consider accepting an escape clause when you believe the seller is unlikely to receive a better unconditional offer. In a slower market, the escape clause may never be triggered.
Only accept an escape clause if you are confident you can firm up quickly when triggered. If you cannot remove your conditions within the notice period, you will lose the deal.
Negotiation Tactics for Escape Clauses
How an escape clause works depends entirely on how it is drafted. Protect yourself by negotiating clear terms.
Define what qualifies as a “bona fide offer.” Some clauses require the competing offer to meet a minimum price. Others require it to be unconditional. Specify exactly what triggers the escape.
Negotiate the notice period. A 24 hour escape clause gives you very little time to react. A 48 or 72 hour period provides more flexibility. The standard in Ontario is 48 hours, but this is negotiable.
Clarify what happens when the escape is triggered. Must you waive all conditions, or just some? Can you counter the competing offer’s terms? Clear language prevents disputes.
Do you have questions about Escape Clauses? Contact Us for a free consultation.