Release Clause
Definition and meaning of Release Clause in real estate.
A release clause is a provision in a real estate contract that allows a seller to continue marketing their property and accept backup offers while waiting for the buyer to meet specific contract contingencies.
In more detail
This clause, also known as a kick-out clause, is commonly used when a buyer's offer is contingent on selling their existing home first. If the seller receives a better or non-contingent offer from a second buyer, the release clause allows the seller to give the first buyer a set timeframe, typically forty-eight to seventy-two hours, to remove their contingency.
If the first buyer cannot or chooses not to remove the contingency, the contract is terminated, and the seller can proceed with the new buyer. This protection prevents sellers from having their homes tied up indefinitely in slow-moving transactions.
Key facts
| Category | Legal, Titles & Closing |
|---|---|
| Also known as | Kick-out clause |
| Common time limit | Twenty-four to seventy-two hours |
| Primarily benefits | The seller |
The seller accepted an offer contingent on the buyer selling their home, but because of a release clause, the seller accepted a backup offer and gave the first buyer a typical seventy-two hour window to clear the contingency.
Frequently asked questions
What happens if the buyer cannot meet the contingency after the release clause is activated?
If the buyer cannot meet or waive the contingency within the required timeframe, the contract is canceled, and the buyer's earnest money deposit is typically returned.
Can a release clause be used for contingencies other than selling a home?
Yes, it can be used for financing or inspection contingencies, though it is most frequently applied to home sale contingencies.