Whenever a buyer or seller is purchasing or selling a house they need to understand how the Kick-Out Clause works from real estate contract viewpoint. Generally speaking there are 3 times when this Clause is used within a real estate transaction:
· Contract is contingent upon the buyer selling their home before purchasing their new home.
· Contract is contingent upon specific event occurring before the buyer can close on their new home. Many times this occurs when the buyer has his home under contract with a third party and the buyer’s current home must close with the third party prior to buyer closing on his new home.
· Contract has a period time, a few days in which the buyers can execute his legal right to walk away from the contract without penalty. Normally in this situation, the buyer has paid the seller a small fee to have this right.
In the above first two situations, the seller will continue to market his property. If another qualified buyer offers to buy the home, then the seller will gives the original buyer a certain amount of time to satisfy the contingency. The time period is usually 2 or 3 days. If the original buyer cannot satisfy the contingency, the earnest money is returned to buyer. Then the second buyer’s offer is accepted by seller. In the third situation, the buyer usually has the uninstructed right to walk away from the contract with no penalties within a short period of time, normally 7 to 14 days. Normally during this time period, buyer will have an inspection on the house and negotiate any adjustments for repairs. This is also an excellent time to get an insurance quote for hazard insurance. In final analysis, a contingency contract is compromise, especially for the seller. The seller normally finds it more difficult to get potential buyers to view his property and get another offer.
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