Missouri Kick-Out Clauses Explained

The process of selling a Missouri property can be overwhelming, with offers, contracts, and deadlines to keep track of. For sellers following a traditional real estate transaction, one of the trickiest scenarios you may encounter is when a buyer puts an offer on your home but is unable to proceed with closing until they can sell their own property first. Having a sure homebuyer is a good thing, but the dependence of the purchase on their own property sale can put you in a difficult situation. This becomes a tool that lets you stay in control.

How does a kick-out clause work? Are there certain scenarios where it’s more suitable? Below, FasterHouse shares an insightful guide to answer these questions and more. We’ll also discuss other options that will help you avoid this scenario in the first place.

Defining a Kick-out Clause

In Missouri, houses can stay on the market for an average of 25 to 50 days, depending on the specific month. The longer your home remains unsold, the more expenses you shoulder. Take note that the average real estate sale in Missouri already takes away 12.03% of the total sales price.

One factor that can prolong a property sale is a contingency offer. In such agreements, the purchaser expresses willingness to purchase your home, but they’re dependent on the sale of their own property first. If they’re unable to sell their real estate asset, then you’re left waiting for long periods.

This serves as protection for sellers who accepted contingency offers. The clause is an inclusion in the real estate contract that allows sellers to continue marketing their property as the homebuyer addresses their contingency. If the seller is able to find a better offer, they must notify the future purchaser to remove the contingency or lose the deal. Typically, the kick-out clause provides a timeframe that lasts between 24 and 72 hours before the original buyer’s contract is cancelled.

How a Kick-Out Clause Works

Here’s how the kick-out clause applies in a real-world example scenario.

 

1. Accept Offer From Buyer

You’re selling your home and receive an attractive offer from Buyer A. However, they can only pay once they sell their home. You would include this in the purchase agreement to ensure that your property sale doesn’t remain in limbo while waiting for Buyer A to sell their house.

2. Status of Home Is Contingent With Kick-out

On the listing, your home will include a status update detailing that the current deal has strings attached. Other homebuyers will see this as a signal that they can still make offers.

3. Another Buyer Makes a Stronger Offer

Buyer B sees your listing and makes an offer with no contingencies or better terms.

4. Kick-out Clause Takes Effect

The arrival of Buyer B means the clause will take effect. Buyer A has 72 hours (in this example) to address the contingency, such as showing proof that there’s a signed offer for their property.

5. First Buyer Addresses Contingency or Is Kicked Out

If Buyer A is able to resolve the contingency, then the contract won’t be cancelled. Otherwise, they walk away, and you sell to Buyer B with better terms.

Should You Include a Kick-Out Clause?

These aren’t always necessary, but here are a few scenarios where this inclusion might be the best practice.

Seller’s Markets

A seller’s market is an environment where there’s a high demand for properties. As such, homeowners have more leverage or negotiation power, able to choose the best offers due to the homebuyer competition. This ensures that your property remains available to accept more attractive terms.

Offer Has Considerable Contingencies

A homebuyer having an unsold home leads to uncertainty, and their sale might take longer than you anticipated, resulting in added expenses on your end or missed offers. These give you a chance to work with more prepared homebuyers.

You Have a Tight Timeline

You may have reasons to sell your property as soon as possible, such as relocation, financial obligations, or significant life transitions. Having a contingent offer can slow you down indefinitely. Including a kick-out clause helps remove some of the uncertainty over your timeline.

Buyer Has Financing Issues

Kick-out clauses are generally used when engaging with purchasers who have yet to sell their property. However, you can include the clause for other scenarios, such as when dealing with homebuyers who have difficulty getting mortgage approvals or who are facing other similar financing challenges.

Advantages and Disadvantages to Consider

What are the pros and cons of including a kick-out clause in your real estate contract, specifically for sellers?

Pros

1. You can still market your property even if there’s a purchase agreement.
2. The kick-out clause encourages accountability on the purchaser’s end, helping to quicken the sale. Plus, the knowledge that someone may swoop in soon makes them treat the agreement more seriously.
3. The clear timeline removes uncertainty and ensures that you can close better deals within days.
4. Your home remains on the market, ensuring that your listing remains visible to other potential homebuyers.

Cons

1. Buyers may avoid properties that have kick-out clauses.
2. It may create some unwanted friction between purchasers and sellers, especially in markets that are balanced.
3. Some homebuyers may skip your listing because they don’t want to form an attachment to a property they might involuntarily have to walk away from.
4. The kick-out clause can shrink your market altogether when many buyers avoid engaging with you in the first place.

Tips To Follow 

These are not small considerations, especially with the disadvantages they might create during a sale. As such, before incorporating this in your purchase agreements, make sure to follow these best practices.

Engage With Trusted Real Estate Agents

An experienced agent can provide guidance as to whether or not a kick-out clause is necessary. If needed, the agent can help you draft the clause using language that protects you. They will be aware of the proper timelines and conditions that will trigger the kick-out clause.

Research the Buyer’s Situation

Information about properties can be publicly accessed. As such, it’s easy to verify a claim regarding a property sale. Knowing that the home is actually listed or in a hot neighborhood provides assurance that you won’t be trying to get updates months later.

Have a Back-up Plan

If you’re working with a contingent offer, the transaction can extend without a definite end. If no one makes a more favorable offer, then you’re left unable to immediately close the sale. This possibility means that there should also be clauses in the agreement detailing how to end the contract under these circumstances.

Avoid the Hassle Altogether

For those who want a faster transaction that avoids the intricacies of traditional home sales, working with a Missouri cash buyer like FasterHouse can be the best strategy. We help you avoid the headaches of contingent offers or kick-out clauses, ensuring that the sale goes ahead as quickly as possible.

Ready To Sell? FasterHouse Makes It Simple

Avoid the inconvenience of traditional real estate sales by engaging with us. We follow a process that makes the entire sale feel like a retail transaction. You send us details about your property, and we make a cash offer after a quick evaluation. No need to wait for buyers to address contingencies or lengthy negotiation processes.

Our team buys homes regardless of their current conditions or attached legal issues. Even if there are extensive repairs needed or if the home is unoccupied and has accumulated damage, you can count on us to provide a competitive cash offer. If you accept it, you can schedule the closing in as few as seven days. You remain in control throughout, reducing headaches and giving you confidence every step of the transaction.

Ready to sell? Learn the current value of your real estate asset with a free cash offer today.

Frequently Asked Questions

What is it?

A kick-out clause is language in a purchase agreement contract when buyers have contingent offers. This allows a seller to continue marketing the property and work with another homebuyer if the original one cannot resolve the contingency within a given timeframe.

How long is the timeframe for this?

Most of these provide 48 to 72 hours for the original buyer to address the contingency, such as securing an offer for a property they’re currently selling. This deadline provides enough time for the purchaser in most cases.

What happens when a buyer fails to resolve the contingencies?

If the buyer cannot address the contingencies, the contract will be terminated. The seller can accept the other offer and enter a new purchase agreement, while the original buyer walks away but they were able to “sell my house fast Saint Louis“.