Easy Seller Hacks for Kick-Out Clauses Everyone Needs to See

seller hacks for kick out clauses

Easy Seller Hacks for Kick-Out Clauses Everyone Needs to See

Everyone wants to make their life easier, and “life hacks” are popular all over the internet today. What about seller hacks? We’ve got some great suggestions! There are a lot of buyers out there that MUST sell their current home before they can close on the sale of a new home. However, this could put your sellers in a challenging situation. Let’s talk through a few things that could happen, and how you can use this scenario to not only help your seller close but also to have a binding backup contract as well! Let’s jump in. 

You’re representing a seller, and they have a buyer that thinks that their house is THE ONE. However, this buyer can’t close on the seller’s house before selling the home they currently own. It’s on the market, and there’s a little bit of interest, but they don’t have anyone under contract at the moment. To protect your seller who still wants to go under contract with them, you need to include a sale or lease contingency exhibit in the contract for the buyer, or a kick-out clause. 

What is a kick-out clause? A kick-out clause is part of a seller’s contract that allows the seller to continue to market their property to get another buyer. If another buyer (we’ll call them buyer two) comes through with a better offer, the seller can go to buyer one to see if they can fulfill their end of the contract. If they cannot, then they will get their earnest money back and their contract will be null and void. Buyer 2 can now move forward with purchasing the property. 

Let’s talk this through a little bit. Sally is selling her house, and Gina has decided it’s perfect and she would like to buy it. However, Gina must sell her current home before she can close on the purchase of Sally’s house. Sally agrees to this but negotiates with Gina to add in a kick-out clause. Sally continues to show her house, eventually catching the eye of Clark. Clark makes an offer to Sally to purchase the home, but he doesn’t have any contingencies on his contract.

Sally then goes back to Gina and lets her know she has another interested party with no contingencies. Gina can then choose to go forward with her contract, or terminate the contract. With the kick-out clause, the contract is terminated, Gina gets her earnest money back and Sally can close on the sale of her property with Clark. 

Now, how can you make this kick-out clause seller hack useful for both you and your seller? 

Seller Hack #1: Active – Under Contract

While your property is technically not available and cannot be promoted as such in the MLS because you have a binding contract with an active buyer, you can still promote it to actively pursue other buyers. How do you do this? Simply put your property’s status as active – under contract. This signals to other agents that although you have a contract with a buyer, you have a kick-out clause and the property could be sold to another buyer. 

As an agent, you may continue to market the property as active on your social media pages. You should indicate that the property is under contract, but with a kick-out clause. You cannot mislead co-op agents or other buyers, but you can generate extra interest in a property.

Seller Hack #2: Completely negotiate a binding backup contract with your second buyer. 

If you have a property that is under contract and a second buyer shows interest, you can generate a binding backup contract with your second buyer, in case the first buyer backs out or cannot fulfill the contingencies on their contract. 

It is incredibly important that you get a binding backup contract from your second buyer. If you go back to the first buyer, and they’re not ready to proceed with their contract and back out, you run the risk of your second buyer backing out of the sale, leaving you at square one. However, if you do get a binding backup contract and buyer one backs out, you can slide right in with your backup offer and happily close the contract. 

To add a kick-out clause to your contracts, use form 601 in the GAR, also called the Sale or Lease of Buyers Property Contingency Exhibit. In the RE forms contract package, the form you’ll be looking for is the RE251, or Sale or Lease Contingency Exhibit. Don’t forget we have some great classes on the GAR Contract Package updates for 2023, you can take a deep dive in our CE classes

Use these seller hacks to create more interest in a property, and develop backup plans for your sellers. In your MLS, you can also take advantage of the reverse prospecting tools to find backup buyers for your sellers! These are some tried and true “seller hacks” that will give your sellers their best chance at a great contract for their property. 

Are you ready to maximize your commission and take your real estate career to the next level? Join Maximum One Realty today! 

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