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Kick-out clauses: Great for sellers, not so great for buyers

On Behalf of | Oct 22, 2021 | Real Estate Law

It’s a pretty hot real estate market right now, but the traditional “slow” season is coming as the holidays approach — and that could make both buyers and sellers a bit anxious.

It’s not unusual for a potential buyer to make an offer on a new home even though they still need to sell their current home. Most of the time, the buyer will ask the seller, via a contingency clause, for anywhere from a month to 90 days (or longer) to make things happen.

What if a seller is afraid of missing out on other potential buyers?

Since the holidays are a difficult time to sell a home, many sellers may be hesitant right now to take that kind of deal from a seller. They may, quite rightfully, worry that the buyer won’t be able to offload their current home in time to close on the deal — and they’ll be stuck waiting until spring when the market picks up again for another buyer to come along.

One solution is a kick-out clause. Generally, a kick-out clause allows the seller to accept the buyer’s offer on a contingency basis. The buyer then gets a set amount of time to try to sell their existing home. In the meantime, the seller can continue to show their house to other potential buyers.

If the seller gets an offer from a second buyer — one who isn’t encumbered by an existing home they have to offload — the seller can then notify the first buyer that they now have a specific amount of time (72 hours is common) to decide how they want to proceed. That usually means they either have to complete the deal without waiting to sell their existing home or cancel the contract and move on.

Real estate transactions can be very complex, and there are a lot of different elements in play at any given time. Experienced legal guidance can help you avoid a major mistake with your real estate deal.