Here's How Kick-Out Clause Is Helping Sellers To Get The Best Deal
In a slow moving market where the property prices are stagnant and more suitable to buyers, sellers are finding it tough to get the reasonable deal for their property. Such scenarios give way to panic sales and result in selling off the asset at a cost much below the market value. However, kick-out clause is a saviour for such sellers who have property to sell in a buyers' market.
What is Kick-out clause?
Kick-out clause allows sellers to continue to stage their homes for inspections to other buyers for sale and to 'kick-out' the existing buyer if the offer received from another buyer is more than previous one. This can happen only under a home contingent contract.
How Kick-out clause works?
Usually, a buyer can buy a new house only once he sells his existing one. However, a seller can be approached by the same potential buyer, offer a fair price and enter into home contingent contract which says that the buyer will be given a time period of 30-90 days to sell his existing home. This contract mentions the 'kick-out' clause and enables the seller to look for other deals while the buyer sells his existing home. Also, a buyer can only buy a home from the seller after obtaining the sale of contract of that house.
Benefits of kick-out clause
The clause favours the sellers and puts buyers in a weaker position. A seller has the right to keep marketing the property with certain conditions. This way, the seller's rights and interest are not harmed while the buyer is staging his own home to sell. For buyers, the benefit lies in the fact that the chosen home can be put on hold as the deal for his own home takes place.
However, a seller may find difficulty in looking for the second buyer as it takes almost 4-5 days to know if the initial buyer has cancelled or kept the contract. The second buyer may or may not be interested in waiting for the verdict.
Tips for buyers and sellers
- Understand the specifics of the clauses and the sale agreement before signing the contract.
- Be clear about the earnest money deposit, whether it would be confiscated or refunded in case of cancellation of the deed with the initial buyer.
- Usually, a buyer gets 72 hours of contingency period if another qualified buyer is found to decide whether to keep the contract alive or to not to purchase the property.