You’re buying your first home, and you’ve done all the research and taken all the right steps. When you made the seller an offer, you made sure that you had a few contingencies in place in the contract. If the house doesn’t appraise well or your funding falls through, you won’t be on the hook for a bad deal.
Your seller, too, has a contingency in mind that they want in the contract: A kick-out clause.
What does a kick-out contingency mean for you?
Essentially, the seller wants the right to keep marketing their home until all of the contingencies in your offer have been met.
Why? Well, in a hot market, the seller doesn’t want to take the chance that they could miss a chance to sell their home if you (the buyer) run into trouble. Appraisals, inspections and bank mortgage processes can take a while — and the seller could lose out.
If another buyer comes around with a cash offer, an offer that’s bigger than yours or an offer that’s simply more convenient (without contingencies), a kick-out clause means the seller can simply pivot their direction and end their contract with you.
Is this beneficial to you? Not in any way. In fact, it could leave you right back at square one in your search for a new home. It may also be something you can’t really avoid if, for example, your bank insists on an appraisal and the real estate market in your area is exceptionally tilted toward sellers.
It’s wise to have experienced guidance
A home is probably the biggest single purchase you’ll ever make in your lifetime, so make absolutely sure that you understand exactly what’s in your real estate purchase contract — and how it could affect your future goals.