Home Buying in Lewisburg>Question Details

April951, Home Buyer in Lewisburg, WV

Kick out clause????

Asked by April951, Lewisburg, WV Wed Apr 22, 2009

We are attempting to buy a home in southern WV throught the USDA program. We accepted a counter offer by the seller, but now he wants to add in a kick-out clause in case he gets a better offer. The house has already been on the market almost 6 months. We will have to pay for inspections and appraisals (this was already part of the deal). Is there anyway we can protect ourselves from losing the money we have to pay up front?

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reimbursements aren't an adequate enough compensation, in my opinion.

What about your time, effort, planning and heart that's gone into this offer at that point. Personally I'd refuse to accept such a kick out.

either he likes your offer, or he doesn't. He an either accept your offer as it is, or wait for the next one... which might not be for as much money, and might not close as quickly either.

the bird in the hand IS truly worth two in the bush.
3 votes Thank Flag Link Wed Apr 22, 2009
Alan May, Real Estate Pro in Evanston, IL
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April... earnest money is highly over-rated (by sellers).

There are so many legitimate ways to get your earnest money legally returned to you (including not meeting your mortgage contingency) that it's not funny.

What difference should it make to the seller whether you have $1,000 or $100,000 in earnest money, if you get to exit the contract within one of your legitimate contingencies? All of that earnest money gets returned to the buyer.

(of course, as a seller's agent, I'd be pushing for more earnest, too!)

Good luck.
3 votes Thank Flag Link Thu Apr 23, 2009
Alan May, Real Estate Pro in Evanston, IL
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"The seller to keep the property on the market and continue to show. If the seller gets another offer that is accepted on the property, the seller/broker will notify the buyer in writing. The buyer will have 48 hours to remove all contingencies and close in at least the same time as new offer or buyer recieves their ernest money and contract to be null and void."

This would be a valid clause, if you had a "contingency" in your contract that you have to sell your house first (that's typically when these kick-out clauses are used) ... but if the only contingency you have in place is your mortgage... then they're out of line asking you to sign this.

Your response was appropriate. I hope they agree, and accept your offer.
3 votes Thank Flag Link Thu Apr 23, 2009
Alan May, Real Estate Pro in Evanston, IL
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Alan - you are correct in that the only contingency we have in place is our mortgage. They did accept the contract as originally written without the kick-out clause today, although they asked for a larger earnest money deposit. We were fine with this as we are pre-approved and our mortgage banker forsees no problems getting the loan financed. Thank you all for your imput.
1 vote Thank Flag Link Thu Apr 23, 2009
I'd counter with something like the following: the seller shall be permitted to terminate this agreement with the expressed written consent of the buyer, provided that the seller agrees to reimburse the buyer immediately in cash for the EMD; inspection, appraisal, and survey fees; loan application/processing fees; and the appropriate interest (since your money would have collected interest during that time).

If the seller is unwilling to accept your modification, then I'd reject his too.
1 vote Thank Flag Link Wed Apr 22, 2009
you're not "technically" still negotiating.

you're still negotiating.. you have nothing accepted yet. And under those circumstances, the seller can attempt to add in any clause they want. But it will only become part of an accepted contract if you agree.

Personally, I don't find a kick-out clause to be to your benefit... "if i find a better offer, I get to accept it"... how does that work for you? I agree with Maria... I wouldn't recommend that my clients sign such an agreement, unless it included some sort of "compensation" for my client, should the seller back and out take another offer. (and even then questionable).
1 vote Thank Flag Link Wed Apr 22, 2009
Alan May, Real Estate Pro in Evanston, IL
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I would not recommend to my client to sign such a contract. This leaves you vulnerable to losing the home you want. If you were my client, I would recommend rejecting this offer. You can do this by not signing and sending a Cancellation Notice or by not signing and sending a Counter Offer Addendum.
1 vote Thank Flag Link Wed Apr 22, 2009
April... here in Illinois, too. Once a contract has been "accepted" (and that means in writing by both parties and delivered)... the only way to modify the accepted contract is by MUTUAL agreement.

that means the seller can't just add a kick-out clause, because he wants to...

unless, you're still in some contingency period. Talk to your Realtor... or your attorney (if you use them in WV).
1 vote Thank Flag Link Wed Apr 22, 2009
Alan May, Real Estate Pro in Evanston, IL
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I am new to this arena, so I had to look up the term Kickout Clause. For anyone that is interested, I found a good definition here https://realestatemetro.com/real-estate-terms/kickout-clause
0 votes Thank Flag Link Sun May 12, 2013
I don't always presume that we're playing on a level playing field. The part that I find confusing, though, is that it's to the seller's BENEFIT to let me know that we're in multiple offers... as that might have made the difference for April, had she known.

She might, under those circumstances, have been willing to sign the kick-out, or perhaps raise her purchase price, or do something else to enhance our offer based on the fact that we were in competition with another offer.

So, the listing agent "missed" an opportunity to improve his client's offer. I guess my error, Dp2, is in over-estimating the other agent.
0 votes Thank Flag Link Sun Apr 26, 2009
Alan May, Real Estate Pro in Evanston, IL
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Whether this kind of behavior is unfair or otherwise, I've encountered it before (multiple times). My mentors taught me and my fellow mentees to account for it in our SOPs, and we structure all of our offers with the appropriate clauses and contingencies to work around it. Stated another way, the fundamental difference with Alan's and my approach in this matter is that he assumes that the listing agent and seller will play fair; whereas, I assume they will stack the deck in their favor and use every gimmick they can think of during their negotiations. I don't blame them for trying, but I also don't play into their strong suit.
0 votes Thank Flag Link Sun Apr 26, 2009
It would have been nice, if they'd told you that they were also negotiating another contract. It might well have changed how you responded.

I imagine that the other contract was aware that they were in a multiple offer situation, and therefore were at an advantage.

I call "unfair" from the listing agent.
0 votes Thank Flag Link Sat Apr 25, 2009
Alan May, Real Estate Pro in Evanston, IL
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Well, one last update on this situation. After telling us they were going to accept our offer, they called our agent a few hours later and said they'd accepted another one. So we're looking for something else. Thanks for all of your imput - I learned alot!
0 votes Thank Flag Link Sat Apr 25, 2009
So, just in case you are curious, the actual clause that the seller wanted added to the contract is: "The seller to keep the property on the market and continue to show. If the seller gets another offer that is accepted on the property, the seller/broker will notify the buyer in writing. The buyer will have 48 hours to remove all contingencies and close in at least the same time as new offer or buyer recieves their ernest money and contract to be null and void." This is an exact quote. Our realtor sent back a letter making the seller aware that we are pre-approved and that the mortgage banker would be happy to attest to this, but that the kickout clause prevents us from accepting the contract. He also explained that, as in any real estate contract, the seller has the option of accepting backup offers in case the primary offer falls through but that he had to give us the time to consumate the deal.
0 votes Thank Flag Link Wed Apr 22, 2009
I agree in spirit with Alan. I simply used something like the aforementioned cause for leverage--assuming that the seller will reject it--as a negotiation tactic, so that I won't have to sacrifice anything important.
0 votes Thank Flag Link Wed Apr 22, 2009
Mr. Sorem - we do have a realtor and are working closely with him. I was just curious if anyone else had faced this situation and what they had done about it. My husband actually has a law degree. As I stated before our realtor had never heard of a clause such as this being in an agreement such as ours. The seller is from out of state and I thought prehaps this was something that was more common in other areas of the country. I had assumed this was an open forum for questions such as this. I am fully aware that information obtained on an internet forum is not a replacement for competent advice from our realtor and attorney. Thank you all for your responses.
0 votes Thank Flag Link Wed Apr 22, 2009
A
It is questionable that you can receive competent and authoritative advice by people who do not know the details of your situation.

If you have a legal question, then consult with an attorney.

If you really want this house then you need the services of a great negotiator. What does your Realtor say?
If you are not represented by a Realtor, don't you think you'd get better advice by paying an attorney that posting on Trulia?

The real answer is that a great negotiator could find out the facts of the situation from both parties and probably work out an arrangement that would meet their needs. Having an offer accepted with the right of first refusal might be an option. That would mean that the seller accepts your offer, however IF he gets a better offer, YOU have the right to meet the price and terms of the new offer and remain in "first position".

If you do not understand the above suggestion, or have questions, please consult an real estate professional who has access to the full facts of your situation.
0 votes Thank Flag Link Wed Apr 22, 2009
Keith Sorem, Real Estate Pro in Glendale, CA
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Thanks to all of you! Alan that's kind of the way we feel about it. Why would we accept such an offer with the market the way it is. We feel he's "shooting himself in the foot" so to speak. We've been pre-approved, we're working closely with a realtor and our banker. The house has gotten a grand total of 2 serious offers in the 6 months it's been on the market. We haven't seen the actual wording of this clause so I'll keep you informed as to it's content. Thanks again
0 votes Thank Flag Link Wed Apr 22, 2009
I guess the reason I'm so confused about this clause is that the reason the seller is giving is that we asked for 45 days to close and he wants to accept any offer that would close sooner. (we asked for the 45 days on the advice of our banker due to USDA qualifications) Our Real Estate Agent (with 20 years experience) has never written a clause like this and never seen one in an agreement like this. Apparently it's more common in other areas of the country, but we've never heard of it here.
0 votes Thank Flag Link Wed Apr 22, 2009
I guess technically we're still negotiating. We made a written offer. All negotiations since then have been oral through the real estate agents. We accepted an oral counter offer with a second written purchase agreement which we then forwarded to the seller for his signature. That's when he started in with this kick-out clause nonsense.
0 votes Thank Flag Link Wed Apr 22, 2009
Here in California when a seller accepts an offer a seller is in contract! Are you working with an agent in your area? Is the kick out clause for the term of the contract? USDA may not allow a kick-out clause and your purchase is contingent upon USDA inspection approval and funding. Why would you agree to a kick-out clause? Even if you were to write an addendum protecting your funds, how would you enforce the seller to pay them without possible court costs? These situations are why working with a Realtor is invaluable.
0 votes Thank Flag Link Wed Apr 22, 2009
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