Did you know that home prices increased by 20% from 2013–2015, while wages have barely gone up? With that said, most Americans need to sacrifice financially in order to save up for their home, and home affordability has made it difficult for home buyers and sellers to come to an agreement on the final transaction price. After receiving an offer, the buyer might still need some time to get their finances in order. There's no guarantee that they'll succeed. Don't waste your time waiting for the buyer. You can continue to accept offers if you include a kick-out clause in the bidding contract. Here's what you need to know about this clause and the 3 terms to include.
The Length of Time That the Buyer Has to Sell Their Current Home or Get Their Finances in Order
Basically, the kick-out clause is beneficial to the buyer as well since it gives the buyer some time to sell their current home in order to gather the funds needed to purchase your property. During this time, you can still put your house up for sale and continue to receive offers. Obviously, you don't want to do this indefinitely until the buyer has their finances in order, as you never know how long you'll wait. Prevent long delays by including terms that specify the length of time that the buyer has to sell their current home or get their finances in order. Once this period has passed, you can essentially "kick-out" the offer submitted by the buyer with no consequences.
The terms in your kick-out clause might differ based on what the buyer needs to do to get their finances in order. For example, you might want to give more leniency to buyers who are trying to sell their current home as opposed to buyers who simply need to apply for and get approved for a mortgage.
The Terms Involved with Accepting Another Offer
In the event that you receive a better offer during this period of time, you'll also want to specify the terms that are involved with you accepting another offer. For example, you could determine that you can accept another offer that comes your way, as long as the other offer is higher than your current offer and there are no contingencies associated with the offer. This would mean that the other buyer would have to be willing to pay you immediately for you to accept their offer.
In the event that the other buyer will also need to sell their house before they can purchase your home, include terms in the kick-out clause as to the procedures that are involved with notifying the first buyer and whether you have a right to shorten the length of time provided to them previously for selling their home or getting their finances in order.
The Length of Time Provided for the First Buyer to Respond if You Can't Accept Another Offer Immediately
Most terms in a kick-out clause won't allow you to accept another offer without first notifying the first buyer and giving them time to respond. The buyer might decide to continue to stick with their previous terms, or they might decide to give up entirely and allow you to accept the other offer in the event that they're having difficulties getting the funds needed to purchase your home. To ensure that the first buyer won't have the opportunity to drag the entire situation out and prevent you from selling your home, include terms that specify the length of time that the first buyer will have to provide you with a response.
If you do not receive a response by the specified time, you can immediately kick-out the first buyer and accept another offer with no consequences, although you will most likely have to return the deposit placed by the first buyer.
Conclusion
Understanding the different clauses and terms that can protect your best interests can help you navigate your way when drafting up a contract upon receiving a bid. Your realtor can help you figure out what terms to include and also help you understand how each clause will affect you and your ability to sell your home and accept new offers.
