Why Sellers Should Add a Kick-Out Clause to Avoid a Contingency Nightmare

What’s a kick-out clause?

A kick-out clause is your safety net as a seller when a buyer has conditions, like needing to sell their own house first. Imagine this: a buyer puts an offer on your home but says they can only buy if their current house sells.

With a kick-out clause, you can keep showing your house and even accept another offer. If a new buyer comes along, the first buyer has a set window, say, 72 hours, to remove their condition or get “kicked out” of the deal. This is actually why it’s called a kick-out clause. It gives you the legal right to remove the original buyer if they’re holding things up.

This way, you’re not left waiting indefinitely while someone’s uncertain situation drags out. In short, it’s like giving your sale a backup plan without burning bridges.

What exactly are contingencies?

In real estate, a “contingent” offer means that one or both parties have requested certain provisions before the deal closes. They let buyers (and sometimes sellers) back out or negotiate if certain things don’t go as planned. Here are some of the most common ones:

It’s standard for homebuyers to pencil in these escape hatches if there’s any chance a deal might hit a snag or unexpected issues come up.

In addition, some buyers will add a contingency to accommodate the fact that they need to sell their current home before purchasing yours. This is called the home sale contingency.

With this type of contingency, the sales contract will state something like “the buyer will officially purchase the home on or before mm/dd/yyyy if they’ve sold their home.” If their home hasn’t sold when that date rolls around, the sales contract is canceled.

One of the biggest risks associated with this type of offer is when there are two or three home purchases that are all contingent on the sale of another property. For example, if the sale of your buyer’s home is also contingent on the sale of their buyer’s home, and then their buyer’s mortgage falls through, the domino effect can send you back to square one.

An ideal situation would be to receive an offer without a home sale contingency. Those typically come from a buyer who has already sold their home, who doesn’t have an existing home to sell, or who doesn’t need the cash from their existing home to qualify for their next purchase. You’ll also deal with far fewer of these contingencies if you were to request a cash offer on your home from a direct real estate buyer.

How a kick-out clause protects your sale

When you accept a contingent offer, you don’t have to put your home on hold. You can still show it and field other offers. If someone else makes a bid, the first buyer has a short period to sort out their conditions or let the deal go. If they meet their requirements on time, the original sale stays, but if not, you’re free to move forward with the new buyer.

Tami Pardee, a top agent in Los Angeles, California, is a big advocate of the kick-out clause. She adds one to every contract she writes, even if it’s not contingent on the sale of the buyer’s home.

“I’ve seen situations where the seller didn’t have a kick-out clause, and then the buyer sat in escrow for six months,” she says. “Without the clause, the seller has no power, and there’s no way to get that buyer out.”

Typically, Pardee’s clauses give the first buyer 24, 48, or 72 hours to drop the contingency and proceed with the sale. If they can’t perform within that time, the seller can kick them out of escrow.

What happens if another offer comes in?

If you’ve accepted an offer that is contingent on a home sale and you have added a kick-out clause, your home should be listed with a status such as “Contingent With Kickout. This tells other buyers that the home is still available for showings and backup offers.

Note that multiple listing service (MLS) listing statuses vary across the country, and your agent will know which one to use for your home and update it for you promptly.

If you receive a second offer, you have an obligation to notify the first buyer and to show proof of the offer with the names obscured. This correspondence usually goes through agents or attorneys, and it must be in writing. An email will suffice.

The notification will give the first buyer “the right of first refusal,” where they have a certain timeframe to decide how they want to proceed. Rather than allowing a general 24, 48, or 72 hours, you might choose to state a more specific timeframe, such as “5:00 p.m. on the third business day after notification.” That can help to prevent any confusion if the second offer comes in on a weekend or holiday.

Pardee points out that if subsequent offers come in, the seller can use those as leverage to put some heat on the buyer who is already in escrow.

“A non-contingent backup offer gives the seller a bit of power and control, particularly in scenarios where the first buyer is requesting a lot of expensive repairs,” she notes. If someone else is waiting in the wings with a non-contingent offer, you might have more leeway to push back on those requests.

And, on the flip side, the first (contingent) contract can give you some leverage with the backup buyers, perhaps coaxing them to offer a higher price than they normally would.

What happens if the buyer can’t remove the contingency in time

If the buyer doesn’t remove their contingency on time, the seller can legally end the contract. The agreement and local rules determine what happens to the earnest money. It might be returned or retained.

Once the deal is canceled, the seller is free to accept a backup or new offer. A well-drafted kick-out clause also means the original buyer loses exclusivity without any penalties. This gives the seller room to move on without getting stuck. At the same time, it keeps things fair for the first buyer. Overall, it’s a way to keep the sale moving and avoid long delays.

What are the pros of a kick-out clause?

Kick-out clauses can benefit both buyers and sellers by keeping deals moving smoothly. They give sellers flexibility while giving buyers a chance to secure their purchase without derailing the process.

For the seller

As a seller, you’ll have the peace of mind of having your home under contract with the ability to continue showing it to prospective buyers. The kick-out clause provides a way out of the contract if the buyer is unable to sell their home in a reasonable amount of time.

It also provides a way to void the contract if a better offer comes around. For example, if a second buyer offers more for the home or is paying with cash, a kick-out clause may come in handy. You would notify the first buyer of the second offer, at which point they would have 72 hours (or whatever time frame specified in the contract) to remove the contingency or cancel the contract.

For the buyer

As a buyer with a home to sell, you can make your offer more attractive and likely to get accepted with a kick-out clause.

It also provides you with time to sell your current property while under contract for another home. Perhaps even more significantly, it keeps you from having to assume and pay two mortgages if it’s taking longer than anticipated to sell your existing home.

What are the cons of a kick-out clause?

For the seller

Accepting a contingent offer with a kick-out clause comes with some financial risk if you’re a seller. For one, other buyers who are interested in your home may hesitate to submit an offer if it’s already under contract with a kick-out clause. They could potentially be put off knowing that their offer could be matched or even beaten by the first buyer.

Another possible pitfall is if the first buyer can’t sell their home and they back out of the deal, you may be left with an unpredictable backup offer. For whatever reason, if the second buyer is unable to proceed with the purchase, you’re essentially starting from square one.

For the buyer

A home sale contingency could weaken your position if you’re a buyer, especially in a hot real estate market where homes are receiving multiple offers. Simply put, it’s tough to compete in a seller’s market with contingencies.

A kick-out clause is a compromise that could benefit buyer and seller, but a seller is less likely to accept one if they’ve received competing contingent-free offers.

Unfortunately, the risk doesn’t end there. Because the seller may continue marketing their property while it’s under contract, there’s a possibility you may get kicked out of the deal if they receive a better offer or if you’re unable to sell your current home in the time specified. You’ll have the option to remove the contingency and proceed with the purchase, but you may be responsible for two mortgages until your home sells.

When kick-out clauses are most (and least) effective

Kick-out clauses are most effective for sellers in competitive markets, where multiple buyers are interested, and you want to keep your options open. They work well if the first buyer has contingencies, like needing to sell their current home, but you still want to consider backup offers. In these situations, the clause gives you leverage and helps you avoid being stuck in limbo.

They’re least effective when the market is slow, and buyer interest is low. If you don’t have backup offers lined up, exercising the kick-out clause could leave you without a committed buyer and delay your sale. By understanding when the clause adds real value, sellers can protect their timeline and make smarter decisions without unnecessary risk.

How to execute your kick-out clause

• Document it: Always put the agreement in writing and make sure the contract is signed by both parties. Otherwise, the kick-out clause won’t be in effect, and you won’t be able to enforce it.
• Set clear deadlines: Include specific timeframes to prevent any confusion or misunderstandings. For example, the clause might state that if another offer comes in, the first buyer would have three business days to complete the purchase of the property, regardless of whether their house has sold.
• Manage expectations: While a kick-out clause offers you some protection and power, it does carry some element of risk. If you choose to accept a back-up offer and exercise the kick-out clause, it can take several days before the contract with the first buyer is canceled. In that case, the new buyer may not want to wait around and could choose to find a different home that’s not under contract.
• Partner with an agent who has experience with kick-out clauses. An experienced agent will know when to recommend adding the clause in the first place, and can then help with crafting the terms and enforcing the actual “kick-out” if necessary.

The kick-out clause can be useful in a situation where you don’t want to pass up a contingent offer, but you also can’t afford to wait weeks or months for the buyer’s sale to go through. Just be sure to seek guidance from an experienced agent to ensure that your clause is clear, specific, and airtight.

How can I avoid making a contingent offer?

One of the best ways to remove a home sale contingency from your offer is to take advantage of modern “Buy Before You Sell” programs. Innovative real estate companies like HomeLight are making it easy to use the equity from your existing home to make your homebuying offer more appealing. Such programs also streamline and simplify the entire buying and selling experience.

Refer to the video below to know how HomeLight’s Buy Before You Sell works:

Find a Top Agent With Experience in Home Sale Contingencies

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Protect your sale with a kick-out clause

A kick-out clause can give you peace of mind when handling contingent offers. It lets you keep your options open and continue marketing your home without putting the sale on hold. While it doesn’t eliminate all risk, it provides a clear path if another buyer comes along. Using one strategically can help you avoid delays, reduce uncertainty, and maintain leverage in negotiations.

Remember, timing and proper documentation are key to making it work effectively. Reach out to a trusted real estate agent today to discuss how a kick-out clause can fit into your selling strategy.

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