If you’re thinking of buying a home, you may come across the term “kick-out clause” at some point. But what is the kick-out clause? In this article, we’ll discuss the Kick-Out Clause and it’s definition, purpose, and implication.

What exactly is a kick-out clause?

The Kick-Out Clause.  Concept of questions
Question mark heap on table concept for confusion, question or solution

As the competitive real estate market continues to heat up, there are more offers including kick-out clauses, so buyers must understand what they are before submitting a bid. A kick-out clause is an arrangement between buyer and seller in which the seller has the option to give another offer priority if they receive one during a certain period, typically 48 hours. If this happens, the original offer is “kicked out” and the new offer takes precedence. Buyers should be aware that even if they put down earnest money or go into contract first, they could still be replaced by another buyer through a kick-out clause.

How a kick-out clause helps the seller

A kick-out clause is an important provision when it comes to real estate contracts, as it protects the seller from being locked into a deal before they have had a chance to explore all of their options. This clause essentially allows the seller to continue advertising their property and solicit multiple offers. Should an attractive offer come along that is more substantial than what the current buyer has proposed, the seller can then use this clause to negotiate with their current buyer or simply reject the existing agreement altogether in favor of a better offer. As such, a kick-out clause serves as an important safety net for sellers who want assurance that they can get the best possible deal available on their property.

How a kick-out clause helps the buyer

When a buyer expresses interest in a given product, sellers often give them a clause that allows them to remove their offer from the table if another offer is presented to the seller within a set period, generally 24 or 48 hours. This clause can be beneficial for both parties involved. From the buyer’s perspective, it allows them to weigh their options and make an informed decision. Meanwhile, for sellers, it ensures that buyers cannot back out without due cause and keeps them invested in the deal. As such, this clause should be taken seriously by those involved in negotiations and can be used as an effective tool to ensure mutual satisfaction.

A kick-out clause protects the buyer while giving the seller flexibility

the Kick-Out Clause.  Two men shaking hands with house model and key on desk

A kick-out clause is a valuable tool in many real estate transactions, as its purpose is to provide protection and flexibility for both the buyer and seller. From the buyer’s perspective, the clause allows them to walk away should any changes arise in their circumstances, such as a job transfer or changing financial outlook. On the seller’s side, it ensures they can take advantage of a better offer should one become available during the contingency period. Ultimately, kick-out clauses help create some space during negotiations while ensuring neither party agrees they may not be comfortable in the long run.

If you make an offer on a property with a kick-out clause, be sure to have your finances in order and be prepared to move quickly

If you’re thinking of taking a step toward homeownership that involves making an offer on a property with a kick-out clause, it’s important to make sure your finances are in order and you’re ready to move if another offer comes in. For many people, this is the largest purchase they will ever make, and being prepared is critical. Investing the time and effort now can avoid headaches down the road if your initial offer does not stand out from competing bidder’s offers. Taking these proactive steps ahead of time can not only get you the home of your dreams but help avoid the potential frustration of missed opportunities due to lack of preparation.

Kick-out clauses are becoming more common so understand how they work before making an offer on a home

The Kick-Out Clause.  The concept of researching by real estate agent

Potential homebuyers must have a thorough understanding of this type of arrangement before making an offer on a property. Do your research and ask a professional real estate agent for guidance so you fully understand a kick-out clause before you make an offer.

A kick-out clause can be a handy tool in today’s competitive real estate market, but it’s important to understand how they work before making an offer on a home. If you’re considering making an offer on a property with a kick-out clause, be sure to have your finances in order and be prepared to move quickly if another offer does come in.

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Richard Seated

Richard has extensive experience in all aspects of buying and selling residential property. He has sold more than 400 homes and well over $100 million in residential real estate. There’s no need to guess. Get expert advice that will allow you to buy and sell with confidence and ease.

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Richard Reid
Richard Reid

Richard is an entrepreneur, founder, investor, mentor, real estate broker, and more. He has worked in Fortune 500 & Fortune 1000 companies in addition to founding, building, mentoring, and growing several smaller companies. He grew up in a family of entrepreneurs and has always been open to how new ideas and innovation can drive business and markets. A graduate of the University of the South – Sewanee, Richard has a strong liberal arts background, a passion for learning, and a drive to educate and empower others to improve their lives. This passion is lived out through his companies, mentoring others, and helping others achieve their personal and financial goals. Richard is a best selling co-author of "Top Dollar" that went to #1 on Amazon in the Real Estate Sales Category. He was also recognized with an Editor's Choice Award by the National Academy of Best Selling Authors for his work in the same book. Richard won an EXPY in Media & Communications from the National Association of Experts, Writers, and Speakers. He has also been featured on ABC, CBS, NBC, and Fox affiliates across the country as a real estate expert. In 2014, Richard was recognized as one of the Top 500 Marketers in Real Estate by the National Association of Expert Advisors where he has also been recognized for business growth. Richard is also one of “America’s Premier Experts” for his commitment to publishing expert content for the benefit of consumers and journalists. For more information, please visit RichardReid.com.