🏡 How a Kick-Out Clause Works in Real Estate: A Seller’s Backup Plan

In the world of real estate contracts, few terms are more misunderstood, yet incredibly useful, than the kick-out clause. Whether you’re buying or selling a property, understanding how this clause works can give you the flexibility and leverage needed in a competitive market. Let’s break it down.

🔄 What Is a Kick-Out Clause?

A kick-out clause is a provision in a real estate contract that allows a seller to continue marketing their property even after accepting an offer with a contingency, usually related to the buyer needing to sell their current property first.

If the seller receives another qualified offer, the kick-out clause gives the original buyer a limited window of time, typically 24 to 72 hours, to either:

• Remove their contingency and proceed with the purchase, or

• Withdraw from the contract, allowing the seller to move forward with the new offer.

🧾 Why Would a Seller Agree to a Contingent Offer?

In a slower market, or when a contingent buyer is offering a strong price, sellers may accept an offer contingent on the sale of the buyer’s current property. However, this locks the seller into a deal that may drag on or fall through.

The kick-out clause offers a layer of protection by:

• Keeping the seller’s options open

• Encouraging contingent buyers to act quickly

• Allowing the property to remain on the market and visible to other potential buyers

🛑 How the Process Works, Step-by-Step

Let’s walk through a typical scenario:

1. Offer Accepted with Sale Contingency
   A buyer submits an offer contingent on selling their property, and the seller accepts it with a kick-out clause included in the contract.

2. Property Stays Active or “Active with Contingency”
   Depending on local MLS rules, the listing may still be shown to other buyers. Agents will note the kick-out clause in the listing details.

3. Seller Gets Another Offer
   A second buyer comes in with a non-contingent offer, or better terms. The seller notifies the original buyer per the terms of the kick-out clause.

4. Buyer Has Limited Time to Respond
   The original buyer is typically given 48 to 72 hours to either:

   • Waive their contingency, and provide proof of financing, or

   • Withdraw their offer, allowing the seller to proceed with the new buyer.

5. Deal Proceeds or Changes Hands
   Depending on the original buyer’s response, the seller either continues the transaction or moves forward with the backup offer.

🤝 Why Kick-Out Clauses Benefit Sellers

• Reduces the risk of a stalled transaction

• Keeps leverage in the seller’s hands

• Creates urgency for contingent buyers

• Improves marketability of the property

⚠️ Considerations for Buyers

Buyers should understand:

• A kick-out clause doesn’t guarantee they’ll retain the property

• They may need to act quickly or risk losing the opportunity

• If they waive the contingency, they must be financially prepared to close, even if their current property hasn’t sold

📌 Final Thoughts

A kick-out clause is one of those smart tools that balances opportunity and risk for both parties. For sellers, it offers the best of both worlds, retaining a qualified buyer while remaining open to better options. For buyers, it’s a chance to get under contract, but time and preparation are critical.

If you're considering buying or selling a property and want to know whether a kick-out clause is right for your situation, I’d be happy to help you navigate your options.

Dennis Prussman, Realtor & Auctioneer

Land Specialist, Realtor, Auctioneer, Husband (38-years), Dad, Bee Keeper, Veteran (34-years).

Dennis is a Sellers Agent who specializes in marketing Missouri farms to a local, regional, and nationwide audience with a goal of maximizing the farm’s sale price. He offers both traditional listing and auction services and is an award-winning marketing specialist at the national level. He has a reputation for exceeding sale price and customer service expectations.