What Is A Kickout Clause?

May 3rd, 2007 categories: Tampa MLS, Tips for Sellers, Tampa Realtor

In this market in which prices have fallen and homes are taking longer to sell, many would be buyers have to sell a home before they can purchase their next home. And many sellers are having to consider offers from buyers in which buyers have a contingency that their home must sell first.

Two years ago with homes selling so quickly and buyers getting into bidding wars (the good old days), many sellers would scoff at such a suggestion.

“Sorry, but we’ll just wait”.

But now, with buyers few and far between, many sellers are willing to consider these offers and give the buyer a chance to get their home sold. But what if you, as a seller, sign an agreement with a buyer that gives them 90 days to get their home sold, and you then get a better offer?

The kick out clause is a special addendum attached to a contract that gives the seller the right to continue to show their home and solicit better offers. If the seller accepts a better offer, the first buyer has to step up to the plate and waive their contingency to avoid being “kicked-out” of the deal.

How can a kick-out clause be good for a buyer? Well, it’s better to have a shot at that dream home rather than have no shot at all. It’s basically a first-right-of-refusal deal.

How can a kickout clause be good for the seller? The seller is allowed to continue to market and show the home instead of placing the home in “pending” status on the MLS. Once in pending status, a home is, for all practical purposes, off of the market. It disappears from Realtor.com, and most agents don’t bother showing their buyer clients homes that are in a stayus other than “active”.

However there are a few things a seller needs to consider before signing a deal with this type of buyer. Firstly, the seller and/or the seller’s agent needs to make sure the buyer’s property is on the market or will soon be. If I’m that seller I want to see if it is being marketed well and if it’s priced competitively. If not, sellers to need to add some language that gives the buyer a deadline for which to begin marketing their home.

And what if the seller gets a better offer, asks the buyer to waive the home sale contingency, and the buyer agrees? The way the standard clause is written, the buyer must make an additional deposit and waive all financing contingencies to avoid the kick out. Will a buyer really do that?

There are no guarantees, especially in this market with the flow of home sales stagnant at best. Contracts fall apart regularly, but the kickout clause, if done correctly, is one that can help both buyer and seller, while protecting each as well.

This entry was posted on Thursday, May 3rd, 2007 at 4:22 pm and is filed under Tampa MLS, Tips for Sellers, Tampa Realtor. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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One Response to “What Is A Kickout Clause?”

1. Tampa Florida Real Estate Blog » Blog Archive » Hillsborough Property Taxes–Paid In The Rears? [September 18th, 2007]

   […] Have a weak contract with your buyer? Hope you have a kick-out! See:What Is A Kick Out Clause? […]

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