Kick-Out Clause Explained: A Simple Real Estate Guide

A kick-out clause in real estate allows a seller to continue showing their home and accept backup offers after agreeing to a contingent contract. If the original buyer fails to remove their contingency (such as selling their current home) within a set timeframe, the seller can cancel the contract and accept another offer.

Kick-out clauses give sellers flexibility while requiring buyers to act quickly to secure the deal.

How Does a Kick-Out Clause Work?

A kick-out clause allows a seller to continue marketing their home after accepting a contingent offer. If a stronger offer comes in, the seller can give the original buyer a short window to remove their contingency or step aside.

Here’s how the process typically unfolds, step by step.

1. A buyer submits a contingent offer.
   The offer is accepted, but it includes a contingency—most commonly that the buyer must sell their current home first.
2. The seller accepts the offer with a kick-out clause.
   This allows the seller to keep the property on the market and continue showing it to other potential buyers.
3. A second buyer makes a non-contingent (or stronger) offer.
   If the seller receives a better offer, they have the option to activate the kick-out clause.
4. The original buyer is notified.
   The buyer is given a short window—usually 48 to 72 hours—to remove their contingency and move forward.
5. The seller chooses the next step.
   If the buyer removes the contingency, the sale continues with them. If not, the seller can cancel the original contract and accept the new offer.

Why Do Sellers Use a Kick-Out Clause?

Sellers often include a kick-out clause when accepting a contingent offer because it allows them to:

• Continue marketing the home while waiting on the buyer’s contingency
• Avoid long delays if the buyer’s sale or financing falls through
• Leverage if a stronger offer appears
• Reduce the risk of having to re-list the property

Why Would a Buyer Want a Kick-Out Clause? 

While kick-out clauses carry a certain degree of risk for buyers, they can offer flexibility that helps both parties move forward without being locked into an uncertain deal.

Buyers might consider agreeing to a kick-out clause when they:

• Need to sell their current home before purchasing a new one
• Can’t afford to carry two mortgages at the same time
• Want to make a contingent offer more appealing to the seller
• Prefer flexibility over locking themselves into a risky purchase

Pros and Cons of a Kick-Out Clause

A kick-out clause can benefit both parties in a real estate transaction, but it also introduces certain trade-offs that buyers and sellers should be aware of before moving forward.

Pros for Sellers

• Keeps Options Open: Sellers can accept an offer while continuing to market their home. This increases the chances of receiving a better or faster offer from another buyer.
• Incentivizes Faster Sales: The first buyer may be motivated to remove contingencies, helping to speed up the sale process.
• Attracts Competitive Offers: The home’s listed as “contingent with kick-out” in the MLS. This encourages other buyers to act fast with higher offers.
• Negotiation Leverage: If a better offer comes in, sellers can ask the first buyer to match the new offer to keep the property. This can lead to a much higher selling price.

Cons for Sellers

• Uncertainty during the process: Managing multiple buyers at once can complicate timelines.
• Complexity: Creating a kick-out clause can be challenging. You have to involve specific language and clearly understand all contingencies.
• Potential fallout: Buyers may walk away if they feel pressured or uncertain.
• Additional coordination: Activating a kick-out clause requires precise timing and communication.

Pros for Buyers

• Increased Opportunity: Buyers with their own contingencies can feel better about making offers that would otherwise be rejected.
• Guidance on Pricing: Knowing the price of their new home helps buyers price their current home more effectively.
• Peace of Mind: Buyers can find and buy their new home while still being in the process of selling their old one. This gives them an extra safety net during the transition.

Cons for Buyers

• Financial Risks: If a buyer removes contingencies without being fully prepared to close, they may face financial risk depending on the contract terms.
• Uncertainty: Buyers may be wary about putting an offer in on a home that has a kick-out clause. Knowing they could lose out at any point if a better offer comes along can be a deterrent.
• Added pressure: With tight timeframes, buyers may feel rushed into removing contingencies before they’re ready.

Are Kick-Out Clauses Legal in Every State?

Kick-out clauses are legal in most states, but how they’re written and enforced can vary by jurisdiction. Some states require very specific language around notice periods, contingency removal, and contract cancellation, while others allow more flexibility.

For example, the timeframe a buyer has to remove a contingency after a competing offer appears must be clearly stated in the contract and may differ based on state law or local real estate practices. In some states, failure to follow the notice requirements exactly can invalidate the clause.

Because real estate contract rules vary, buyers and sellers should review kick-out clauses carefully and consider consulting a real estate attorney or licensed professional to ensure the clause complies with local requirements.

Common Misconceptions About Kick-Out Clauses

Kick-out clauses are great when selling your home, but there are some lingering myths and misconceptions that should be cleared up.

Myth 1: Kick-Out Clauses Always Favor the Seller

Kick-out clauses do give sellers more options, but they also bring a level of uncertainty. 

The seller could find themselves in a situation where both the first and second buyers withdraw. This would leave them without any buyers.

Myth 2: Kick-Out Clauses Are Bad for Buyers

Kick-out clauses can actually benefit buyers in a number of ways, particularly those who need to sell their existing home before being able to buy a new one. The clause gives them a chance to put a contingent off on a new home while still working on selling their old one.

Myth 3: Kick-Out Clauses Are Always Simple and Straightforward

Kick-out clauses are quite intricate, with specific timelines and conditions that require careful attention. To avoid any missteps, buyers and sellers must be well-informed about the terms and how they’re structured.

Myth 4: All Contingent Offers Have Kick-Out Clauses

Not all contingent offers include a kick-out clause. Some people assume that every contingent offer automatically comes with a kick-out clause. This isn’t at all the case. Both parties must clearly negotiate and agree on including a kick-out clause.

Myth 5: Kick-Out Clauses Guarantee a Quick Sale

While kick-out clauses can motivate buyers to act quickly, they don’t guarantee a fast sale. If the first buyer is unable to remove their contingencies and no better offers come in, the property could remain unsold for an extended period.

How Do Kick-Out Clauses Work in Practice?

In the real world, a real estate transaction involving a kick-out clause would look something like this:

The seller accepts a contingent offer from Buyer A, who needs to sell their current home to afford to purchase the new one. After accepting the contingent offer, the seller continues to market the home.

A week later, Buyer B submits a non-contingent offer at a higher price. The seller decides to activate the kick-out clause.

At that point, Buyer A is given 48 to 72 hours to remove their contingency and proceed with the purchase.

If the buyer meets the deadline, the contract stays in place. If not, the seller can cancel the agreement and accept the new offer.

Why Would a Seller Accept a Contingent Offer?

Sellers may agree to a contingent offer when the overall terms outweigh the added risk. Common reasons include:

• A higher purchase price: Buyers with contingencies may offer more than non-contingent buyers to make their offer more competitive.
• Strong buyer motivation: Buyers who need to sell their current home are often highly motivated to close and may act quickly to meet deadlines.
• Larger earnest money deposits: A higher deposit can signal commitment and provide reassurance, even when contingencies are involved.
• Favorable market conditions: In markets with limited inventory or slower demand, sellers may be more willing to accept contingencies to secure a qualified buyer.
• Buyer financial strength: Even with a contingency, sellers may prefer buyers who have solid pre-approval or strong financing in place.

What Happens if the Buyers Decide to Walk Away?

If a buyer decides to walk away from a home purchase, they may forfeit their earnest money deposit. Additionally, the seller is then free to accept a second offer on the home.

If the original sales contract was contingent on the buyer obtaining financing, the buyer will have 72 hours from the date of loan denial to notify the seller in writing and cancel the contract. If the buyer doesn’t notify the seller within this time frame, they’re still obligated to purchase the home.

Kick-Out Clause FAQs

Here are some of the most commonly asked questions about kick-out clauses in real estate.

What is the purpose of a kick-out clause?

A kick-out clause allows sellers to continue marketing the property and accept a stronger offer if one becomes available.

How long does a buyer have to respond to a kick-out clause?

The response window is specified in the contract and typically ranges from 48 to 72 hours. During this period, the buyer must remove their contingency or risk losing the home.

Do buyers get their earnest money back if they’re “kicked out”?

In most cases, yes. If the buyer fails to remove the contingency within the required timeframe, the contract is canceled and the earnest money deposit is typically returned, assuming all terms were followed.

Are kick-out clauses only used with home-sale contingencies?

They’re most common when an offer depends on the buyer selling an existing home, but kick-out clauses can also apply to other contingencies, such as financing or appraisal conditions.

Can a seller accept another offer while under contract?

With a kick-out clause in place, yes. The seller can continue to show the property and accept backup offers, subject to the terms outlined in the contract.

Are kick-out clauses legal?

Kick-out clauses are generally legal, but the rules governing notice periods and enforcement can vary by state. Contract language must comply with local real estate laws.

Is a kick-out clause good or bad?

It depends on the situation. Kick-out clauses can benefit sellers by reducing delays, while buyers may face added pressure to act quickly. Whether it’s a good option depends on market conditions and each party’s financial flexibility.

How To Avoid Kick-Out Clauses

Kick-out clauses are typically used when there’s uncertainty in a buyer’s ability to close. Here are a few ways to reduce that uncertainty and hopefully avoid kick-out clauses altogether:

Accept Fewer or No Contingencies

Sellers can prioritize offers that don’t depend on the buyer selling another home or meeting additional conditions. Fewer contingencies reduce the need to keep a property actively marketed.

Require Proof of Financial Readiness

Requesting strong pre-approval documentation or proof of funds helps confirm that a buyer is financially prepared to close. Cash buyers often provide proof of funds upfront, which can further reduce uncertainty.

Shorten Contingency Deadlines

If contingencies are unavoidable, sellers can limit how long buyers have to satisfy them. Shorter timelines reduce risk and may eliminate the need for a kick-out clause altogether.

Consider Cash Offers

Selling your house for cash eliminates many of the delays that kick-out clauses are meant to address. While not the best option for every seller, cash transactions can simplify the process when speed or certainty is a priority.

Use Backup Offers Instead

Some sellers choose to accept backup offers rather than include a kick-out clause. This keeps alternative options in place without forcing the original buyer into a rapid decision window.