A buyer makes an offer on a property and includes a contingency that the sale is dependent on the buyer selling their current home within 60 days. The seller accepts this offer but includes a 'kick-out' clause. What does this 'kick-out' clause typically allow the seller to do?
- ATerminate the contract immediately if a better offer is received.
- BForce the buyer to close escrow within 30 days, regardless of the contingency.
- CRequire the buyer to remove their contingency within a short timeframe if another offer is received.
- DIncrease the purchase price if the buyer's home sells quickly.
Show answer & explanationAnswer & explanation
Correct answer: C. Require the buyer to remove their contingency within a short timeframe if another offer is received.
A 'kick-out' clause (also known as a 'right of first refusal' or 'escape clause') allows a seller to continue marketing their property. If another acceptable offer comes in, the original buyer with the contingency is given a short period (e.g., 24-72 hours) to remove their contingency or the seller can accept the new offer.
Why the other options are wrong
- A. The seller cannot immediately terminate; the original buyer must be given a chance to remove their contingency.
- B. The clause specifically addresses the contingency's removal, not an arbitrary acceleration of the closing date against the buyer's terms.
- D. A 'kick-out' clause does not allow the seller to unilaterally change the agreed-upon purchase price.
Kick-Out Clause
A provision in a real estate contract, typically used with contingent offers (e.g., sale of buyer's home), that allows the seller to accept another offer if the original buyer cannot remove their contingency within a specified short period.
- Protects sellers from tying up their property indefinitely.
- Gives the original buyer a 'right of first refusal' to proceed without their contingency.
- Often includes a 24-72 hour notice period for the original buyer.
Memory trick: Contingencies are conditions; kick-outs are seller's conditions on those conditions.