If you’re selling your home, you may find yourself fielding multiple offers from buyers. Some of them can include contingencies, such as that the contract is valid only if the buyer first sells their current home. Depending on how hot the market is at the time and how many offers you’re getting, agreeing to this contingency might make sense. But sometimes a seller doesn’t want to be locked into a contingent contract. This is where a kick-out clause becomes a useful remedy.
Kick-out clauses, also known as bump-outs, are provisions in real estate contracts that allow a seller to keep their home on the market even if there is a signed contingent contract. The usual way kick-outs work in Connecticut is that if a seller accepts a contingent offer but subsequently receives a better one, the seller must notify the first buyer. Then, the first buyer gets a certain amount of time, usually 72 hours, to decide if they want to remove the contingency and go ahead with the purchase or back out. If the buyer agrees to remove the contingency, then the transaction proceeds to closing, usually within 45 days. If the buyer decides to cancel, then the seller returns the buyer’s earnest money and is then free to sell the home to a different buyer.
For sellers, the main advantage of including a kick-out clause is that it gives them flexibility to keep the home on the market and keep showing the house to other potential buyers. This protects the seller from problems that could arise on the buyer’s end. For example, a buyer’s offer might be contingent on loan approval or getting an appraisal, or, as mentioned earlier, selling their current home. If the contingent buyer can’t sell their home or get a loan, the seller can use the kick-out clause to cancel the deal and accept a better offer.
There are some risks to using kick-out clauses. They need to be carefully drafted to explain how much time the first buyer will have to decide what to do if a second offer comes along. The clause should explain what happens if, for example, the seller receives the second offer on a holiday or weekend. Do these days count toward the waiting period? The kick-out clause should also explain exactly which contingencies are covered and which are not. If you are considering including a kick-out clause when selling your home, be sure to have the contract drafted by an attorney, or, if it was written by your real estate agent, have it reviewed by an attorney.
The attorneys at Gesmonde, Pietrosimone & Sgrignari, L.L.C. in Hamden and East Haven have extensive experience drafting and reviewing Connecticut real estate contracts. Please call 203-745-0942 or contact us online to schedule a consultation with a lawyer who would be happy to assist in your transaction.
Gesmonde, Pietrosimone & Sgrignari, L.L.C. is located in Hamden, CT and serves clients in and around North Haven, Hamden, Waterbury, Bethany, Milford, Wallingford, Prospect, Woodbridge, Northford, Madison, Beacon Falls, Branford, Cheshire, North Branford, East Haven, Naugatuck, Meriden, Ansonia and New Haven County.
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