What happens if a backup offer is made on a property when a kick-out clause is in effect?
Asked by: Jimmy Fahey DDS | Last update: December 23, 2025Score: 4.3/5 (64 votes)
If you get a higher backup offer, the first buyer will have to match the price in order to preserve the deal. That's the great thing about kick out clauses—you can remove the first buyer if you get another offer without contingencies or a better price that they can't match.
Is a backup offer binding?
Keep in mind backup offers are a legally binding contract. If you are in a backup position and you would like to still look at other homes for sale, then you should make sure this is spelled out in your backup offer. This will allow you to continue your home search instead of putting all your eggs into one basket.
What does "active with kick-out clause" mean in real estate?
Typically, when you put an offer in on a home the seller has to immediately stop showing their home. With a kick-out clause, they can continue to show the house and even accept better offers, ultimately kicking you out of consideration.
Can a buyer sue a seller for backing out of the contract?
Possible consequences of backing out
And in many cases, a home seller who reneges on a purchase contract can be sued for breach of contract. A judge could order the seller to sign over a deed and complete the sale anyway. “The buyer could sue for damages, but usually, they sue for the property,” Schorr says.
Can you rescind a backup offer?
A backup offer can lock you into a legally binding agreement if it's accepted, even if you want to move on after issuing one. Because it's a legal contract, it can be difficult to cancel a backup offer once it's been issued.
What in the world is a "Kick Out Clause"?!?
How do I cancel a backup offer?
- if the primary contract falls through, your contract will become the primary contract.
- as long as you are in backup position and pay your option fee you can terminate the backup offer by notifiying the seller's agent in writing and receive your earnest money back.
Can you legally rescind an offer?
In most cases, yes—at-will employment laws allow employers to terminate an employee or rescind a job offer to a prospective employee for any legal reason. Torres says some of the most common legal reasons for employers rescinding a job offer include: Candidate dishonesty or misrepresentation.
What is the seller's compensation if the buyer backs out?
The purpose of earnest money is to provide the seller with compensation in the event that the buyer backs out of the deal through no fault of the seller and in violation of the agreements in the purchase contract. If that happens, the seller gets to keep the earnest money.
How long after you buy a house can you sue the seller?
Depending on the laws of your state, you may have up to 3 years to seek legal action if the sellers KNOWINGLY hid or lied about issues in their disclosure. If a property is sold “as is” or purchased through an auction, then it is up to the buyer to do their due diligence and pay for any inspections that they choose.
What happens to earnest money if a buyer backs out?
The earnest money deposit serves as the liquidated damages amount in real estate contracts. If the buyer defaults, the seller can keep the deposit regardless of the actual amount of damages. That also means that if the damages are higher than the liquidated damages – you're out of luck!
What are kick-out rights?
Kick-Out Rights (VIE definition): The ability to remove the entity with the power to direct the activities of a VIE that most significantly impact the VIE's economic performance or to dissolve (liquidate) the VIE without cause.
What is the 72 hour kick-out clause in real estate?
In most cases the buyer has 72 hours to decide if they want to remove their contingencies and proceed with the sale anyway. If not, the original sale is cancelled. The buyer receives their deposit money back and the seller can proceed with the second offer.
What are the alternatives to the kick-out clause?
Terms often associated with the kick-out clause include contingency, right of first refusal, earnest money deposit, and non-contingent offer, all of which are key components or alternatives to the kick-out clause in a real estate agreement.
Why would a seller not accept a backup offer?
However, accepting and moving forward with backup offers brings certain risks. If the seller moves forward with a backup offer, the buyer in the cancelled transaction may pursue litigation to obtain the property.
What happens to a backup offer when the primary offer falls through?
Answer: A backup offer is a secondary offer made on a property that is already under contract. If the primary offer falls through, the backup offer automatically becomes the primary offer and the transaction can proceed without delays.
What should be included in a backup offer?
A backup offer contract is not a binding contract until the first offer is terminated. You need to include a backup addendum and a termination clause in your backup offer contract to specify the conditions and timelines for your backup position.
What is a seller liable for after closing?
California: 4 years for written contracts, 3 years for property damage.
Can a seller sue the buyer for backing out of the house purchase?
The short answer is yes, a seller can hypothetically sue a buyer for backing out. But it depends heavily on the circumstances and reasons surrounding the contract termination.
What happens if you buy a house and something is wrong?
If you discover material defects after the real estate transaction has closed, you may have an action for breach of contract. A qualified, local real estate attorney with experience in housing and construction defects can help you understand your rights and draft an appropriate demand letter.
How close to closing can a seller back out?
Most home sales involve the use of a standard real estate contract, which provides a five-day attorney review provision. During this time, the seller's attorney or the buyer's attorney can cancel the contract for any reason. This allows either party to back out without consequence.
Can someone sue you after they buy your house?
The first major thing that the seller has the duty to accurately disclose is the defects in the home. No matter what, they must tell you about latent defects. Then, they must also disclose any encumbrances on the property. If they do not, they can be sued after the sale when you discover whatever is wrong.
Do you lose earnest money if a loan is not approved?
Prospective buyers can do several things to protect their earnest money deposits. Make sure contingencies for financing and inspections are included in the contract. Without these, the deposit could be forfeited if the buyer can't get financing or a serious defect is found during the inspection.
When can you legally revoke an offer?
Whoever makes an offer can revoke it as long as it hasn't yet been accepted. This means that if you make an offer and the other party wants some time to think it through, or makes a counteroffer with changed terms, you can revoke your original offer.
How do I retract an offer?
A withdrawal may be communicated by any usual means of communication, including a phone call, a text message or an email. To be effective, however, it is crucial that a withdrawal (also called a revocation) be communicated to the party who received the offer (called the offeree) before the offer is accepted.
Is it illegal to renege an offer?
Taking into account what may be a long and tedious hiring process, rejecting a previously accepted job offer is a difficult experience for most people. As long as the candidate has not signed an employment contract with the employer, there are no legal consequences for reneging on the job offer.