What Is a Kick-Out Clause and How Does It Affect Our Contingent Offer?

What is a kick-out clause on a contingent offer in Orange County? It's a term the seller asks for when your purchase depends on selling your current home.

I'm Jeanette Nelson, a REALTOR® with Jeanette Nelson Real Estate, Keller Williams Realty, serving Orange County, Huntington Beach, Costa Mesa, Fountain Valley, and surrounding areas. For a family moving up, the order of selling and buying matters as much as the price, and a kick-out clause is one of the terms that shapes that order.

The California Department of Real Estate (DRE) reference book explains that when an offer is contingent on the sale of the buyer's property, agents use a standard form called Contingency for the Sale or Purchase of Other Property. The details, including whether the seller can keep marketing and how notice works, depend on what that form and your contract say.

A sale contingency asks the seller to wait on something they don't control: your home selling and closing. A kick-out clause gives them a way out if a buyer without that contingency comes along.

For you, that trade can be worth it. A seller who might turn down a contingent offer may accept one with a kick-out clause. For the basics of these offers, see can we make an offer contingent on selling our current home.

The steps generally look like this, though your contract controls the specifics:

1. The seller keeps the home on the market, if your contract allows it.
2. Another buyer makes an offer the seller wants to accept, often as a backup.
3. The seller gives you written notice to remove your sale contingency.
4. You decide within the time the contract sets. You can remove the contingency and move forward, or cancel and step aside.

The DRE reference book notes that removing a contingency must be in writing on the standard form, and that time is of the essence in California purchase contracts. Deadlines matter. Read yours with your agent and, if you have legal questions, a real estate attorney.

If you step aside, the other buyer moves into first position. See what is a backup offer and should I make one.

If you remove your sale contingency, you're agreeing to buy whether or not your current home has sold. That's a big decision. You'd need a way to cover the down payment and, possibly, two housing payments for a while.

Ways families sometimes prepare:

• Talk with your lender early about whether you could qualify without selling first. The Consumer Financial Protection Bureau (CFPB) notes that preapproval letters are not guaranteed loan offers, so ask what yours is based on.
• Look at your equity options. The CFPB's HELOC guide explains how a home equity line of credit works, including that your home secures the line. See what is a bridge loan and can it help us move up.
• Have your current home ready to list, or already listed or in escrow, before you write the offer.

This is general information, not legal or lending advice.

Some steps help a seller feel more comfortable:

• List your home first, or get it into escrow.
• Show your numbers. A clear preapproval and proof of funds.
• Keep the timeline realistic. A sale contingency with a reasonable deadline is easier to accept.
• Know your plan if notice comes, so you can answer quickly and calmly.

If the kick-out risk feels like too much, other paths exist. See what do I need in place to buy my next home before I sell and what should I plan for if I sell my home before I buy.

If your family is moving up and weighing a contingent offer, I'd love to map out the timeline with you before you write it. Call or text me at 714.366.8575 | DRE: 01397168, or contact me.