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What is a kick-out clause?

On Behalf of | Feb 4, 2020 | Property Law

When engaged in a real estate deal or transaction in Dallas, Texas, it is imperative that you understand your rights and responsibilities per the real estate contract. Moreover, you should make it a point to thoroughly review the contract with a qualified real estate attorney, otherwise, you risk being blindsided by a contract clause that seems less than fair. One such clause that buyers often overlook or ignore is the kick-out clause. 

According to Realtor.com, the kick-out clause is a clause that grants the seller the right to continue to market the home after receiving an offer with contingencies, or conditions that the seller must meet. One of the most common contingencies that warrant a kick-out clause is that the potential buyer sells his or her home before completing the transaction. 

While such a contingency may seem reasonable, as most people cannot afford one home while paying for another, it may not be in the seller’s best interest to hold onto the property for an indefinite period. After all, the seller may need the proceeds from the sale to buy a new home for him or herself. 

The kick-out clause offers somewhat of a compromise. On the one hand, it puts the buyer “first in line” to buy the home. On the other, it allows the buyer to continue to market the home, show it to potential buyers and accept backup offers, despite the existence of a contingency contract. If the seller finds another qualified buyer, he or she must notify the other party of the contingency contract. The initial buyers then have a certain amount of time — typically 72 hours — to decide to either keep the contract alive or terminate it. Termination would mean the potential buyer has decided against purchasing the property.