Real Estate Glossary

What Is a Kick-Out Clause?

Kick-out clauses tend to benefit the sellers, as they can keep the property on sale and accept the first offer that manages to close the deal. Nonetheless, this only happens when the buyer's proposal has a contingency. Therefore, the seller keeps looking for a more straightforward option while the contingency ends.

If a better offer is found during the contingency period, the seller has the legal right to "kick out" the original buyer to proceed with the new proposal.

However, when the seller gets this second offer, they must immediately notify the original buyer, who would usually get 72 hours to decide whether to proceed with the purchase without the contingency or lose the property.

If they choose the latter, they must immediately get their earnest money back.

Opting for a contingency with a kick-out option also makes it more likely to be accepted by the seller, as they don't miss any chance of selling their property. However, it is a risky option if the demand for the property is high.

Remember that this isn't a contingency. It is a clause that goes with one, and you can still proceed as you would with your specific contingency.