What is a Kick Out Clause in Real Estate?

Buying or selling a home is a huge decision - one that comes with plenty of jargon and legal terms. Among the many clauses you might come across in a real estate contract, one stands out for its potential to shake up the deal: the kick-out clause. 

But what does it actually involve, and why should it matter to you?

If you're a first-time homebuyer, understanding this provision is essential to navigating today’s competitive market. 

Imagine you’ve found your dream home, but you still have to sell your current one. Or maybe you’re selling and want to make sure you're not stuck waiting forever for a buyer to sell their property. 

This is where the kick-out provision comes into play. It can protect your interests, give you flexibility, and even speed up your transaction.

In this blog, we’ll break down everything from understanding the kick-out clause, how it works, and why it can be a game-changer in real estate deals.

Check Out: How to Buy/Sell Real Estate without a realtor?

What is a Kick-Out Clause?

A kick-out clause is a provision found in a real estate contract that allows the seller to terminate the agreement under certain conditions. This clause is often included in contracts where a buyer is attempting to purchase a property contingent on the sale of their own home. 

If the seller receives a more favorable offer or no longer wants to wait for the buyer to sell their property, they can “kick out” the current buyer, allowing them to move forward with another offer.

Think of it as a way for sellers to keep their options open, especially when there’s a chance of a more lucrative deal down the line.

How Does a Kick Out Clause Work?

In most cases, a kick-out provision benefits the seller more than the buyer, though both parties should understand how it works to avoid surprises during negotiations.

Here’s an example to explain how it works:

• Buyer A is interested in purchasing House Z but hasn’t yet sold their own property.
  

• The seller agrees to an offer from Buyer A, but the contract includes a kick-out provision. This provision allows the seller to accept another offer if Buyer A doesn’t sell their property within a specified time frame (usually 30-60 days).
  

• If the seller gets another offer they prefer, they can “kick out” Buyer A, terminating the original agreement, and proceed with the new offer.

This clause provides the seller with the flexibility to accept a better offer without waiting indefinitely for the buyer to sell their current home.

Also read, What Buyers and Sellers Should Know About The Fair Housing Act? 

Types of Kick Out Clauses

There are different types of real estate kick-out clauses, and each one can vary in terms of when and how a seller can back out of a deal. The most common types are:

1. Standard Kick Out Clause

This is the most basic form. It typically allows the seller to terminate the agreement after a certain period (usually 30-60 days) if the buyer’s home hasn’t sold. The buyer is usually given a specified amount of time to remove the contingency or risk losing the property.

2. First Right of Refusal Kick Out Clause

Under this type of clause, the seller agrees to give the original buyer a chance to remove their contingency if the seller gets a better offer. If the original buyer declines, the seller can proceed with the new offer.

3. Kick Out with a Notice Period

This clause gives the buyer a fixed amount of time to sell their home, and if they don’t meet that deadline, the seller can issue a “kick out notice” and proceed with other offers. In this scenario, the buyer may not have the chance to back out of the deal if they fail to meet the deadline.

Quick Tip: What If I’m Selling My Home FSBO - Do I Need a Kick Out Clause?

As a For Sale By Owner (FSBO) seller, it can be a smart move to include the clause in your contract - especially if you’re dealing with offers that have contingencies.

While negotiating with buyers directly, you might encounter offers that are less than ideal or come with time constraints you’re not comfortable with. A kick-out provision helps protect you from being stuck waiting if things don’t progress smoothly.

Why Do Buyers Agree to a Kick-Out Clause?

While the kick-out provision may seem like it puts buyers at a disadvantage, there are valid reasons why they may accept this provision. In fact, many buyers are willing to agree to it if the property they’re interested in is especially desirable or if the market is competitive.

What Are the Benefits for Buyers?

• Securing a Dream Property: Sometimes, buyers are willing to accept this clause because it lets them secure a home they want even if their current property hasn’t sold yet. This can be crucial in markets where desirable homes are hard to come by, and they don’t want to risk losing the property to another buyer.
  

• Time to Sell: Even with a kick-out provision in place, buyers still benefit from time to sell their own home. It’s a way to move forward with purchasing without committing fully until they have more clarity on the sale of their property.
  

• Negotiation Leverage: For buyers, agreeing to a real estate kick-out clause can sometimes provide negotiating leverage. They might negotiate other terms, such as a lower price or additional seller concessions, in exchange for accepting this clause.

Check Out: Different Negotiation Techniques for Buyers

How Something Different RE FSBO Can Be Your Ally in Real Estate Success?

Navigating real estate deals can feel like a maze, especially when you're trying to buy or sell a property on your own. 

But what if you had a trusted partner to guide you through every twist and turn, helping you understand complex terms like the kick-out clause and beyond? 

That’s exactly what Something Different RE FSBO is here for.

If you're considering selling or buying your home For Sale By Owner (FSBO), we’re here to arm you with the knowledge and strategies you need to confidently take control of your sale. 

Ready to make your next move with confidence? 

Book your one-on-one consultation with us today!

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The kick-out clause offers flexibility for both buyers and sellers in real estate transactions, but it’s essential to approach it with a clear understanding of its potential impact. For both a buyer navigating contingencies and a seller trying to maintain control over a sale, the clause can be a valuable tool if used strategically.

Weighing the pros and cons will help you make a decision that aligns with your goals, ensuring that you don’t feel locked into an unfavorable situation.