Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
1) Is a kickout clause a common insertion into these types of contracts?
2) Regarding earnest money - is it possible, and also is it common, for the seller to word the contract in such a way that if the deal falls through because the buyer was unable to sell their existing property that the seller receives the earnest money?
To elaborate on #2. The desire to insert this type of rights into the contract for the seller would be to protect them from situations where they take their property off the market for 45+ days only to have the buyer fail to sell - and then get stuck with absolutely nothing to show for it.
1) Is a kickout clause a common insertion into these types of contracts?
2) Regarding earnest money - is it possible, and also is it common, for the seller to word the contract in such a way that if the deal falls through because the buyer was unable to sell their existing property that the seller receives the earnest money?
To elaborate on #2. The desire to insert this type of rights into the contract for the seller would be to protect them from situations where they take their property off the market for 45+ days only to have the buyer fail to sell - and then get stuck with absolutely nothing to show for it.
Tanks
I assume your contingency is a home sale. That is, you will buy the home, but have to sell yours first. If you can get a seller to accept it, yes, a kickout clause is pretty common, at least in my market.
It's possible for the seller and their agent or attorney to TRY to word the contract the way you describe, allowing them to keep your earnest money if you can't get your home sold. I've never seen such be accepted, however. The buyer and their agent or attorney need to be careful to read & understand the contract to which they are agreeing, and change or refuse terms they don't like.
In reality, the kickout clause is there to protect the BUYER. It gives the buyer the opportunity to remove the contingency so they can avoid losing the house to a more ready buyer. If there is need for a kickout, then the property is still being marketed, and the seller is not losing marketing time.
Sorry writing the post from the seller's perspective here not the buyer. I like the kickout clause since it allows me to take offers and continue marketing while I'm under contract to a buyer. They would have right of first refusal in the event a better offer came along. Was just wondering how common that type of arrangement is.
The earnest money question comes up because I didn't want to get into a situation where a buyer ends up being unable to sell their home after 45+ days and then I get left holding an empty bag with nothing to show.
Sorry writing the post from the seller's perspective here not the buyer. I like the kickout clause since it allows me to take offers and continue marketing while I'm under contract to a buyer. They would have right of first refusal in the event a better offer came along. Was just wondering how common that type of arrangement is.
The earnest money question comes up because I didn't want to get into a situation where a buyer ends up being unable to sell their home after 45+ days and then I get left holding an empty bag with nothing to show.
Thanks
Are you in a slow market? I can't see any other reason to accept their offer with such a contingency. And what about the prospective buyer's market? Some markets are so slow...it can take 90 days+ to sell.
In my market from time to time I do see active/pending taking backup offers in our MLS. My market for anything over $500K is extremely slow. Most of the activity is below $300K.
The market here is decent but I'm selling by owner so expect this to take longer.
Regarding the earnest money question I think that can be forgotten about at this point. As long as I'm able to keep a kickout clause in the contract then I can still market the property and accept offers so I'm not concerned so much with getting the earnest money if the original contingent sale falls through.
I can't imagine any seller in our market agreeing to a contract with a contingency for the buyer to sell his/her home. You sign a contract to sell your home and wait until your buyers get their mortgage commitment before you do the deal on your next place.
The market here is decent but I'm selling by owner so expect this to take longer.
Regarding the earnest money question I think that can be forgotten about at this point. As long as I'm able to keep a kickout clause in the contract then I can still market the property and accept offers so I'm not concerned so much with getting the earnest money if the original contingent sale falls through.
The issue is that when buyers see active/pending/tbo........they usually don't offer.... unless the property is one of a kind - spectacular - gotta have it!!
Buyers also expect FSBO's to be priced below comps.... after all.. your pocketing the commission you're saving.
The approach I've been taking so far is to tell the buyer I can pass on some of the savings to them if they don't bring an agent in on their end. If they bring an agent then I can't come off the asking price much. I don't intend to pocket the whole 6%.
I can't imagine any buyer allowing the earnest money to go to the seller if they don't sell their house because that's the point of the contingency. If their house doesn't sell, the contingency allows them out with no penalty to the seller. Why attach a contingency if the seller could keep the earnest money?
It would be fair that the seller keeps the earnest money if the buyer ties up their property for 2 months trying to sell theirs first and are unable to do so. It's not fair that the seller ends up with nothing to show for 2 months of waiting on them to get their property moved so they can follow through on the rest of the deal.
That said with the kickout clause, and the seller able to continue marketing the property and take offers, it is much less of an issue in my opinion. And I wouldn't get pushy about it in that situation.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
