In real estate transactions, a kick-out clause is when a seller replaces a buyer with another buyer because of a contingency. A kick-out clause is full of uncertainties both for the buyer and seller. Before kicking out a buyer from a sales deal and selling the property to another buyer, the seller needs to notify the buyer and receive their consent.
On the other hand, it may create many inconveniences for a buyer with contingency if they fail to take care of the condition or get rid of it within a provided period. In the event of a kick-out clause, the buyer and seller can consult with a knowledgeable and experienced real estate agent to make things work.
A Kick-Out Clause is a type of necessary condition that occurs in a purchase agreement. Here, the parties involved must comply with this condition to proceed with the transaction. A kick-out clause affects the buyer and seller in different ways.
A kick-out clause allows sellers to continue marketing their property if they come across an offer with contingencies. To simplify, a kick-out clause enables a seller to “kick out” a buyer presenting contingencies if they come across better offers.
For example, for buying a new home, a buyer must sell their existing house first. If the seller receives an offer that does not involve any contingencies, they can consider removing the contingencies from the purchase agreement or can choose to close the sale.
A kick-out clause may make a buyer’s offer appear less ineffective or powerful.
When a seller adds a kick–out clause to a purchase agreement, it enables them to continue marketing their home after they accept a contingent offer. This condition arises when a buyer asks for a home sale contingency because they need to sell their property before buying a new one.
In such a situation, when the seller finds a sales deal without any contingencies, they can kick the buyer out of the deal who needs to sell their existing house first. However, if the seller proceeds to sell the property to a second customer, they need to notify the buyer.
Here, the buyer needs 24-72 hours to decide their next step and provide consent in the selling process to make it legitimate. Once the buyer gets notified about the second buyer, they can remove the contingency and proceed with buying the property anyway. They can also choose to walk away from investing in the deal.
