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Elaine Abercrombie: ‘Kick-Out Clause’ Protects Home Sellers

The language provides a compromise on 'contingency' contracts with buyers

Although less than ideal, home sellers are seeing more “contingency” contracts, with which buyers make an offer contingent upon being able to sell their own home first to complete the purchase.

Elaine Abercrombie
Elaine Abercrombie (Roe Anne White photo)

If the buyers aren’t successful, their offer to purchase becomes null and void, potentially leaving the sellers at square one.

A compromise has developed, called a “kick-out clause,” which is wording included in the contract that allows the sellers to continue marketing their home, even while under contract. If the sellers receive another offer, the buyers are granted a “kick-out” period — usually 72 hours — to respond by removing their sell-first contingency or by securing financing and completing the purchase.

Unfortunately, chances are that most buyers who must sell first won’t qualify for another loan on the new property. If the buyers fail on both counts — selling and financing — then the sellers have the right to accept another offer from qualified buyers.

While this might seem to put the buyers at a disadvantage, the sellers must have some sort of protection against an offer that could tie up their listing indefinitely and perhaps never be consummated.

Consider including language in the contract that also requires the buyers to begin aggressively marketing their own home within a specified period. If the buyers don’t leap to action, the contract can be voided.

Elaine Abercrombie, a broker with Village Properties Realtors, is president of the Santa Barbara Association of Realtors. She can be contacted at .(JavaScript must be enabled to view this email address).

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