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36 | MARCH 26, 2014
FLATHEADBEACON.COM

REAL ESTATE

MONTANA LIFESTYLES
The ‘Kick-Out’ Clause

By BENNY L. KASS
Under this contractual arrange-
ment, the potential purchaser has the
Although no one likes to sign con- right to delete the contingency and go
tracts that are contingent on the pur- forward with the purchase. But the pur-

chasers’ ability to sell their own house, chasers also have to demonstrate, to the
unfortunately it is now a fact of life that satisfaction of the seller, that they are i-
must be recognized by every buyer and nancially able to qualify for the loan. In
seller. Generally speaking, when buyers many instances, the purchasers will not
present an ofer to purchase, they can in- be able to satisfy the seller, because they
clude a contingency for the sale of their would not have the funds to permit them
house. This is known as a “contingent to go forward with the purchase.
contract.” In simple English, this means From the sellers’ point of view, this

that if the speciied event does not occur is an acceptable arrangement. Although
– in this case the buyers do not sell their the sellers have signed a contract, in ef-
house – then the contract to purchase fect they are keeping the house on the
the new property becomes null and void market. The sellers have the right to
and the purchasers are entitled to a full continue to show it to other potential
refund of any earnest money deposit.
purchasers, and have the right to take
Needless to say, sellers do not want back-up contracts if possible. Real estate

to take their house of the market for an agents would continue to market your
indeinite period. Accordingly, a com- house even after you have signed the
promise has been developed, which is irst contract.
known as a “kick-out” clause. Under this From the buyer’s point of view, the
arrangement, the sellers add language to kick-out clause is also an acceptable
the real estate sales contract stating that compromise -- but obviously can be sub-
while they are willing to accept a con- jective. The buyer can understand that
tingency contract based on the purchas- a seller is reluctant to take the house of

ers’ selling their current house, the sell- the market when the contract is subject
ers will continue to market their house. to a selling contingency. On the other
If another qualiied buyer is found, the hand, if a seller obtains a higher price for
seller will give the current purchaser the house from a third party, the seller
a certain amount of time – usually 72 SHUTTERSTOCK PHOTO
has the ability to be arbitrary by using
hours – in which to remove the contin- inancing.
very least the following language in any the excuse that the current purchaser is
gency (i.e. keep the contract alive) or ex- This creates a dilemma for both par-
kick-out clause: The parties agree that not inancially able to purchase, there-
ercise the contingency and decide not to ties. If the purchasers remove the sale sellers’ property shall remain on the
by giving the seller the right to sell to a
purchase the new property.
contingency but still have the inancing market during the above contingency third party.
This kick-out clause has to be care- contingency in the contract, it is prob- period. If the purchaser does not remove The kick-out clause is a compromise
fully drafted. If the potential purchas- able that a lender will not give a bind- the above contingency and provide evi- for both parties, and has become an ac-
ers are confronted with the 72-hour ing loan commitment to the purchasers dence satisfactory to sellers in their sole ceptable practice in the real estate are-
kick-out period, and decide to delete the unless they sell their house irst. Thus, discretion of purchaser’s ability to per- na. However, the sellers should also in-
sale contingency, they may still be able the mere removal of the sale contingen- form under the terms herein within (a sist that the buyer immediately begin
to get out of the original contract if they cy does not meet the seller’s needs. The speciic number of) hours after receipt to market their own property. In most

cannot get inancing. Keep in mind that purchaser can still ind a reason to back of written notice that seller has accepted cases, people do not actively look for
most standard sales contracts also con- out of the contract, based on another a secondary contract, purchaser’s de- new homes without having their current
tain another contingency on the ability contingency in the contract.
posit shall be promptly returned in full, home for sale.
of the purchaser to obtain the necessary
Thus, sellers should include at the
and this contract shall be null and void.
Submitted by NMAR PR Committee

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