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What is a Kick-out Clause and How Does It Work in Real Estate?
Definition & Meaning
A kick-out clause is a provision in a sales or real estate contract that allows a seller to terminate the agreement if they receive a better offer before the sale is finalized. This clause is commonly found in real estate transactions, particularly when the buyer must sell their current home before purchasing a new one. The kick-out clause enables the seller to continue marketing the property and gives the buyer a specified time frame to proceed with the purchase, regardless of whether their existing home has sold. If the buyer cannot complete the purchase within that time, the seller can cancel the agreement.
Table of content
Legal Use & context
The kick-out clause is primarily used in real estate law, especially in residential property transactions. It serves to protect the seller's interests while allowing buyers a chance to secure a new home. This clause is especially relevant in competitive housing markets where multiple offers can arise. Users can manage related documents using legal templates available through services like US Legal Forms, which are drafted by qualified attorneys.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A seller has a property under contract with a buyer who needs to sell their current home. The seller receives a higher offer from another buyer. Under the kick-out clause, the seller informs the first buyer that they have a better offer and gives them 48 hours to finalize the purchase. If the first buyer cannot proceed, the seller can cancel the agreement.
Example 2: A buyer is interested in a home but must sell their own home first. The seller includes a kick-out clause in the contract, allowing them to accept other offers. If another buyer comes forward, the seller can give the first buyer a deadline to complete the sale. (hypothetical example)
State-by-state differences
State
Kick-Out Clause Variations
California
Commonly used; often includes specific time frames.
Texas
Frequently included in contracts; must be clearly defined.
Florida
Used in competitive markets; may have additional stipulations.
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
Comparison with related terms
Term
Definition
Difference
Contingency Clause
A provision that makes the contract dependent on certain conditions.
A kick-out clause allows cancellation if a better offer arises, while a contingency clause is based on specific conditions being met.
Right of First Refusal
A right that gives a party the option to purchase before the seller considers other offers.
A kick-out clause allows sellers to accept better offers, while a right of first refusal requires sellers to offer the property to the holder first.
Common misunderstandings
What to do if this term applies to you
If you are a seller considering including a kick-out clause in your contract, consult with a real estate attorney to ensure it is properly drafted. If you are a buyer facing a kick-out clause, be prepared to act quickly if the seller receives a better offer. You can explore US Legal Forms for templates that can help you navigate these situations effectively. If your circumstances are complex, seeking professional legal assistance is advisable.
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