A Kick-Out Clause, sometimes referred to as an escape or bump clause, is a protective provision commonly found in real estate purchase agreements. Its primary purpose is to safeguard a seller who has accepted a contingent offer, typically one where the buyer’s ability to purchase is dependent on the sale of their current home (a home sale contingency). While sellers often prefer non-contingent offers, they may accept contingent offers in a slower market or to attract a specific buyer, using the kick-out clause as a safety net.
When a seller accepts an offer with a kick-out clause, they retain the ability to continue marketing their property. If a second, more favorable offer (often non-contingent or with better terms) is received, the kick-out clause is triggered. The original buyer is then formally notified and given a specific, limited timeframe—commonly 24, 48, or 72 hours—to either remove their contingencies (most often, the home sale contingency) and proceed with the purchase, or terminate the contract. If the original buyer cannot or chooses not to remove their contingencies within the stipulated period, the seller is free to cancel the first agreement and accept the second offer.
While the Homeowners Association (HOA) is not a direct party to the real estate transaction or the kick-out clause itself, the presence of such a clause can indirectly impact the HOA and its management. When a property in an HOA community goes under contract, the HOA often receives requests for critical closing documents such as resale certificates, estoppel letters, governing documents, and financial statements. If a kick-out clause is exercised and the initial sale falls through, the HOA might need to prepare a new set of documents for a different buyer, potentially under tight deadlines. HOA board members and community managers should be aware that sales involving kick-out clauses can create a dynamic environment, requiring efficient processing of documentation to support timely closings, regardless of which buyer ultimately purchases the property. Understanding this clause helps HOA management anticipate and respond to the fluctuating needs associated with property sales within their community, ensuring smooth transitions for new homeowners.
A homeowner in an HOA community accepts an offer contingent on the buyer selling their current home, but includes a 48-hour kick-out clause. When a stronger, non-contingent offer comes in, the original buyer is given two days to remove their home sale contingency or lose the property.
An HOA manager receives a request for a resale certificate for a property under contract with a kick-out clause. The manager understands the potential for the initial sale to fall through, requiring a new request from a different buyer if the clause is triggered, and prepares for quick turnaround times.