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What is a Kick-Out Clause and How It Benefits Sellers

Updated: Sep 26, 2023

As the seller's market continues to thrive across the country, sellers are facing the challenge of choosing the right offer among multiple offers on desirable properties. While it may initially seem like a great problem to have, there's always a concern about whether the chosen buyer can actually close the deal. In the midst of rising home prices, quick decisions by sellers can sometimes lead to complications down the line. This is where a kick-out clause comes into play as a helpful tool.

A kick-out clause allows sellers to continue marketing their home for sale even after accepting a buyer's offer that includes certain contingencies. It outlines the conditions under which the seller can cancel or "kick out" the contract if a better offer comes along. Contingencies commonly found in real estate contracts include loan approval, appraisal, and home inspection. Buyers may also include a contingency to sell their current home. By having a kick-out clause in place, sellers are protected from situations where the escrow process drags on beyond the agreed-upon time frames.

For instance, if a buyer is unable to sell their home within the specified time frame or if home inspection negotiations continue past the agreed-upon period, the seller can utilize the kick-out clause to either force the buyer to remove the contingency or cancel the contract. This mechanism helps ensure that the escrow process proceeds smoothly and on schedule, minimizing delays that could potentially cost the seller both time and money.

By including a kick-out clause in their contracts, sellers not only have the assurance of a backup plan if the initial deal falls through, but they also have the opportunity to consider potentially more favorable offers that may arise during the marketing period. This clause provides sellers with greater flexibility and control in navigating the complexities of the real estate market.

In conclusion, a kick-out clause is a valuable tool for sellers in a competitive real estate market. It offers protection, control, and the potential for better options. By understanding the benefits and implications of a kick-out clause, sellers can make informed decisions to maximize their chances of a successful and timely home sale.

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