The Real Estate Contract Kick Out Clause Arsenal

Dated: 02/19/2018

Views: 134

So you finally got a buyer on your house that's been listed for 60 days but there's one catch. The purchase is contingent on them selling their own home. 

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While no one likes to sign contracts which are contingent on the purchasers' ability to sell their own house, unfortunately it's just part of the real estate game. With rising home prices, and stricter lending requirements, many buyers need to unload some of their debt before making a new home purchase. So what do you do?

So first, what  does it mean to purchase with contingency to sell? It's exactly what it sounds like. Basically, it's when buyer can only purchase if they sell their own house. This is known as a "contingent contract." What that means for you as the seller is if they buyer can't sell their house, they won't be buying yours.  This makes it a hard offer to accept since you don't know if they're going to sell their house and you don't want to stop marketing your home and miss more qualified buyers. So again I ask, what do you do? Well I have a solution. 

Enter  "The Kick-Out" clause. What this does is allows the seller to throw their own contingency at the buyer stating that they will accept their conditions but the seller will continue to market the home and will notify the buyer of any offers they want to accept. Then the seller gives the buyer a window - usually about 72 hours - to either move forward with the purchase or exit the contract and make way for the new buyers. 

One set back with the kick-out clause however is the fact that it doesn't lock the buyer in 100%. They could accept the contingency and still back out by using the financing clause. The truth of it is, if they can't get a loan without first selling their home then that's not going to change even if they decide to move forward with the offer to buy in the 72 hour period. 

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So, to make sure you cover both ends as the seller you need to include the following language in the 72 hour kick-out clause: 

The parties agree that sellers' property shall remain on the market during the above contingency period. If the purchaser does not remove the above contingency and provide evidence satisfactory to seller in their sole discretion of ability to perform under the terms herein within (a specific number of) hours after receipt of written notice that seller has accepted a secondary contract, purchaser's deposit shall be promptly returned in full.

With this language the buyer both has to remove the contingency to sell their home and show proof of the ability to buy the home or else you as the seller can accept the new offer. Pretty awesome, right? Now you have the right to both continue marketing your home and if a back-up offer comes you don't have to stress about the first buyer not selling their home. Draft the kick-out clause with the example language and you are guaranteed to sell the home to one buyer or another. 

So when you talk to your listing agent make sure this situation is discussed and they understand the kind of language you want in your kick-butt clause. I mean kick-out clause. 

My last piece of advice if you as a seller ever come across a buyer that must sell their own home first is this - make sure the buyer can show you that they are actively marketing their home and have it listed so that you know they are serious about the situation and their offer. 

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Good advice? Listen, I got more of that. I'd be happy to share it with you if you're thinking of selling and still need a listing agent. I cover the Knoxville area and the surrounding counties. So if you are in need of one, you can reach me through this website.  

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Benjamin Barredo

"I do the right thing in everything I do" is my motto. I make the home buying and selling process relatively stress free by providing the best possible service with the most efficient technology and m....

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