Sharing Your Home Sales Price - Do or Don't?

Texas homebuyers quickly find their new mailboxes filled with solicitations and requests after their purchase. They are also overrun with appeals and demands for information regarding the purchase of their property.

In addition to the sham mortgage insurance offers and tax filing service scams are enticements to disclose the sales price of their property. Most of these communications look very official and it can be hard to decipher what is legitimate and what is not. Almost none of it is.

Texas is a non-disclosure state

In Texas, a buyer or seller is not required to disclose the sales price of a property to anyone or any entity whatsoever. Real estate sale prices are not public record.

In most states, you can look up any address through the county property tax appraiser to see the most recent sales price. The public has access to sales prices in 38 states. In some states, the public disclosure of real estate sale prices may be printed in local media or appear on the publicly recorded deed. In other ‘disclosure’ states, only governmental entities have access to the sales price.

Our state considers a property sale to be a private transaction and you have a right to keep the details away from curious folks as well as government agencies.

With whom should you share your sales price?

There is no law that says the state, county, city or appraisal districts can require you to provide your sales price. Nosy neighbors and relatives may also ask or speculate about what you paid for a property. It is nobody’s business.

You do not need to disclose the purchase price to the County Tax Office, your HOA, an appraiser, prying neighbors or anyone else. Your tax accountant is the only person with whom you should share the purchase price of a property.

Why does the County want to know?

Many Texas appraisal districts want full disclosure of real estate sales prices to help establish the taxable value. Texas has no state income tax. Our high property taxes help make up for that. Texas property taxes are assessed and paid by counties, cities, schools, appraisal districts, etc. The total property taxes average about 3% of the assessed value of the property each year. If your tax assessor has your actual sales price, they will usually base your taxes on that price.

Zestimates & Other guessers

Web sites like Zillow attempt to place a “home value” on a property based on different formulas. The estimated sales price and value posted on most web sites are inaccurate. These automated valuation models include limited information gathered from publicly recorded mortgage liens, tax assessments and geographic maps.

Their estimates do not include actual sales prices or take into account data such as negotiated concessions, repairs, closing costs, etc. that one of the parties may have paid. They do not take into account lot sizes, condition of the property, etc. Only licensed Realtors and Appraisers have access to all of this information.

Who really knows the sales price?

The buyer, seller, agents, title company and mortgage lender all know the sales price of a property. If a property is for sale in the Multiple Listing Service (MLS), then the listing broker must report the sale and sales price to the MLS. The MLS collects and maintains this proprietary information.

Property owner information, not sales price, is public information. Marketing and sales companies scour county records every day and collect information on deed transfers and filing of mortgage liens. That is where they find the addresses of new homeowners to solicit. A lot of the junk mail will also come from folks who find you when you turn on your utilities. That is also public information unless you request that that the utility provider make it private.

How to reduce requests

What should you do when faced with an official request asking for the details of the sale? Ignore it. There is enough information out there about all of us already. In my opinion, no one should offer up this additional financial and personal information voluntarily.

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HOA Resale Certificates

Resale Certificates are often a frustration when buying or selling a property with a Home Owners or Property Owners Association. They are required when selling a property that has mandatory dues or assessments paid to an HOA.

What is a Resale Certificate?

A resale certificate is actually a set of documents prepared by the HOA or the HOA’s management company. They contain disclosures and detailed information about the property and the HOA community.

While associations have their own sets of rules, some requirements are alike for all Texas transactions with mandatory associations. In Texas, the seller must provide a resale certificate to the buyer by the deadline stated in the purchase contract.

The Texas Real Estate Commission provides a standardized resale certificate form for both single family homes and condominiums.

https://www.trec.texas.gov/sites/default/files/pdf-forms/37-5.pdf

https://www.trec.texas.gov/sites/default/files/pdf-forms/32-4_0.pdf

The cost

The cost for obtaining a resale certificate in Texas is capped at $375. Since it is the seller’s responsibility to provide it, the seller typically pays this expense at the time it is ordered.

HOA management companies usually expect payment upfront before they will process an order. By Texas law, they have 10 business days (usually 14 calendar days) to deliver the resale certificate and documents once the order is placed and payment is received.

There is no restriction on rush or demand fees. If the requested information is due before 10 business days, the additional expedited or demand fees range can range from $100 to $350 on up. To avoid rush fees, allow adequate time in the contract for these documents to be delivered.

The HOA may also charge transfer fees, processing fees, account closure fees, or fees for items like common area keys. These are disclosed in the resale package.

Essential elements

When a property is part of a mandatory association, the owners must pay dues to maintain amenities, shared areas and perhaps other services. An HOA resale certificate discloses the amount and frequency of dues and assessments. It includes a financial outline of the HOA, including the budget, reserves and previously approved future special assessments or dues increases.

The rules and regulations of the association are made known in the governing documents. Restrictions and rules that owners are expected to follow are spelled out. These can often include details about landscaping, pets and animals, sign and flags, holiday decorations, parking, noise levels, rental restrictions and more. Architectural requirements and aesthetic rules such as front door color, fence design, roof materials, etc. are specified in these documents.

Association voting procedures, board member elections, etc. are explained. The common areas, maintenance, and repairs that the association is responsible for are detailed as well as the owner maintenance requirements. The Resale Certificate also discloses any lawsuits they are involved with, and other information.

Specific information about the property being sold is included in the resale package. This gives the buyer notice of any violation of the HOA rules prior to closing. This will also reveal if the current owner is behind on any dues.

Acceptance of the HOA documents

Once the resale package is disclosed, silence is considered consent. It is the buyer’s right and responsibility to review the HOA rules, restrictions, requirements, and resale certificate to ensure they are comfortable with the association’s mandates.

As stated in the contract, after receiving the HOA documents and resale certificate, the buyer has a specified number of days to terminate the contract if they don’t like what the resale certificate or other documents reveal.

The buyer’s mortgage lender will want to review the HOA information for details such as owner occupancy rates, lawsuits, and the HOA financial health. If a property doesn’t meet the lender’s criteria, they may refuse to issue a loan.

The purpose of the resale certificate is to provide transparency and protection to all parties. It ensures the buyer is informed about the community they are joining, their obligations to the HOA and the rules they are agreeing to follow. 

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State of the Texas Title Industry 2022

Let’s start by pointing out that the real estate market is like the weather. It is very localized. It changes like the seasons. And it can often be unpredictable. Stormy skies today may be sunny tomorrow. And just because it is raining in Houston doesn’t mean it is the same in Austin.

The year 2021 was an unexpectedly good one for the title industry. Historically low interest rates, a strong housing market and hearty refinance numbers made for a positive year.

Higher prices, Fewer Transactions

We’ve started 2022 with a record low inventory of homes for sale across North Texas. Consequently, we’re expecting fewer sales in 2022. Fewer real estate sales means less business for the title industry.  

With the rise in both home prices and interest rates, housing affordability is expected to worsen. As long as demand exceeds supply, 2022 will challenge potential home buyers. That makes this housing market very different than some of the booming seller’s markets we’ve seen in the past 20 years.

This year of high prices is not the real estate bubble the country experienced prior to the great recession of 2007-2009. There have not been a lot of subprime and risky mortgages issued in recent years. This market is a different situation because it is driven by supply and demand. Most homeowners currently have positive equity in their properties.

As mortgage rates rise, the refinance volume is expected to dip and provide less title insurance business in that sector as well. Refinance transactions typically account for at least 20 percent of annual title insurance volume.  Industry experts from The Title Report indicate that refinance transactions could drop by 40 percent. That will depend on interest rates which are expected to slowly rise to about 3.6 percent on average by the end of the year.

Changes in the Title Industry

The title business has had to adapt to a lot of change - like most businesses in the last two years. The pandemic brought about a boom in remote signings and curbside closings. Record setting volumes have combined have created their own challenges in this business that is highly regulated by the state.

This past year also saw a rise in financial scammers and security breaches. Additional security and advanced technology in the title world are expected to continue developing rapidly throughout 2022. Title companies will be expected to adapt quickly to the changing technology and additional requirements to challenge their expertise.

The consensus among industry experts is that while 2022 may not be as robust as the previous year, it should still be another good year for title volume. Confidence remains strong as we see what direction 2022 takes us. 

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Sending Purchase Funds to the Title Company

Not all money transfers are created equal. Both wire and Automated Clearing House (ACH) transfers are ways to electronically move money from one bank account to another. They may seem alike, but they are not.

These methods of sending funds are referred to as an EFT or electronic funds transfer.  EFT is an umbrella expression that includes various types of financial transactions. EFT payments include wire transfers, ACH transfers, e-checks, ATMs, Point of Sale transactions, and more.

Understanding the differences between these is crucial when sending money to a title company.

Wire Transfer

Wire transfers are electronic payments used to send funds directly from one entity’s bank account to another’s. With wire payments, funds are instantly accessible when they arrive in the payee’s bank account and the recipient can access the funds without delay.

Wires are often used for large transactions when reliability and speed are critical factors. Because of the speed, once funds have been wired, reversing the transfer is difficult if not impossible.

Wire transfers can include a cost to both the sender and the recipient. Wire transfer fees are set by each financial institution and range from $10 to $100 to send or receive a wire transfer.

Title companies warn clients that wire transmissions are often the target of scams. It is essential to confirm the person and account that the funds are being sent to prior to initiating a wire transfer. Wire instructions will always include the bank routing number, account number, and name of the party receiving the money.

Wire transfers are preferred by title companies for security and dependability. They are much better than cashier’s checks, which can take longer to process and have become easy to counterfeit.

ACH Transfer

An Automated Clearinghouse transfer, or ACH, also moves money electronically. This is similar to sending a check and is becoming more common as a means to replace paper checks. ACH transfers may be the system used if you have automated bill payments, direct payroll deposits, or make direct person-to-person payments through PayPal, Venmo, or another system.

ACH payments are typically best for frequent or recurring transactions where the amount is smaller. Consumers like them for recurring payments for utilities, loans, etc., and for payments for services like Uber. Both large and small businesses like ACH as an e-payment method in this digital economy. Money can be both sent and received with ACH transfers.

The lower cost makes an ACH an appealing option for most consumers. Most ACH transfers are free for the sender or cost just a few dollars. While ACH payments are less expensive, wire transfers are faster. 

The ACH network electronically processes transfers in large batches or groups to an automated clearinghouse, which sends them onto a bank. These can take a few hours or several days to complete and clear. The process is too slow for funding real estate transactions where time is of the essence. With a real estate sale, the closing is not complete and the property does not change ownership until all funds are confirmed and processed by the title company. ACH payments do not meet the definition of “good funds” per the Texas Insurance Code, Title XI, Section 2651.202. Sending the title company an ACH transfer for closing is a recipe for delays.

In addition to the time factor, title agents are averse to ACH transfers because they may be reversed. The criteria for stopping an ACH transfer is determined by each bank. 

When purchasing a property, always confirm that funds sent to the title company are via a confirmed wire transfer and not an ACH transfer. If your Bank of America rep tells you they are the same thing, they are wrong. Follow the title company instructions and remember that the task of getting good funds to the title company on time is the responsibility of the buyer.

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Digging into your Home's Mineral Rights

When purchasing a Texas property, the mineral rights may or may not come with it. Uncovering and then cashing in on mineral rights are not as easy as Jeb Clampett shootin’ up some crude.

Do Mineral Rights Always Transfer?

Whether any mineral rights transfer with a property depends on what rights the current seller owns. Let’s dig a little deeper. In the beginning of time (or for the sake of this article, let’s say 300 years ago), a piece of land included all rights to the property along with the right to do what you wanted with it.

But in time, some property rights may have been given away, taken away, or sold. A property owner can transfer all or part of their property rights by deed, lease, easement, mortgage, or will. Someone who owned your piece of land 100 years ago could have done any of those with the mineral rights. You may own a huge piece of land and have no right to the minerals that lie beneath it.

TREC Residential Contract, Paragraph 2D

Using the standard TREC residential contract, the mineral rights owned by the seller transfer with the property per paragraph 2D. But only the mineral rights owned by the seller will transfer to the buyer. An owner can’t sell you rights that they don’t have. If the seller wants to retain any of the mineral rights, an addendum must be included.

The mineral rights addendum specifically states: “A full examination of the title to the Property completed by an attorney with expertise in this area is the only proper means for determining title to the Mineral Estate with certainty …”

Even though the surface rights may convey to the buyer, the subsurface mineral rights like gas, oil and other mineral rights that may not necessarily transfer. Surface rights that transfer can include natural resources such as plants, water and other resources. Details on ownership of those need expert legal advice as well.

How Do You Get The Mineral Rights?

If you really want to who owns the mineral rights for a property, hire an abstract company. Or you can try the do-it-yourself method by researching the property records at your county clerk’s office. It is often necessary to trace records back through several transactions to determine where they may have initially been sold and then whether those rights were then sold to someone else.

In Texas, mineral rights are transferred with a Mineral Deed.  Occasionally, mineral rights are not sold but are leased. A leasehold is a different scenario that needs a real estate attorney’s guidance.

Laws concerning mineral rights can be complicated. Just remember that property ownership is completely separate from mineral rights ownership. Sorry folks, but you have no rights to your land’s minerals if you don’t legally own the rights.

The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem

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Texas 2021 Real Estate Legislative Update 2.0

A little property tax relief is coming for some Texas homeowners. Two minor property tax bills were approved at the Texas Legislature’s August 2021 Special Session. With some of the highest property tax rates in the country, most homeowners welcome any law that provides Texans a tax break.

New Homeowner Homestead Exemption

Under current law, when someone purchases a home, they must wait until January 1 of the following year to receive the benefit of a homestead exemption. This new law allows a homebuyer to receive their homestead exemption in the year that they acquire the property, rather than having to wait for January 1 of the following year.

Starting in January 2022, new Texas homeowners who qualify for a homestead exemption will become immediately eligible to receive a property tax reduction when they purchase their property. Those buyers will receive the exemption allocated proportionally from the time they purchase the property. For example, if the buyer purchases the property in February, they will receive the homestead exemption on that year’s tax bill for February through the end of the year.

Texas homestead exemptions from counties, schools, cities, and special districts reduce the property taxes for the homeowner. The amounts vary from county to county. All Texas homesteads receive a $25,000 exemption on their home’s value from school property taxes. Other local entities, like cities and counties, offer a separate residence homestead exemption. A homestead exemption can typically save a homeowner 10%-20% on their property taxes.

Senior and Disabled Exemptions

The Texas Legislature passed “an Act relating to the reduction of the amount of a limitation on the total amount of ad valorem taxes that may be imposed by a school district on the residence homestead of an individual who is elderly or disabled to reflect any reduction from the preceding tax year in the district’s maximum compressed rate and to the protection of school districts against the resulting loss in local revenue.”

That’s a mouthful of legal jargon. Essentially, this legislation proposes a reduction in school taxes for seniors and disabled Texans. It would extend the school property tax rate cuts approved by the Texas Legislature in 2005, 2007, and 2019.

School property taxes for homeowners who are at 65-plus years old or who are disabled are frozen at the amount owed in the year they qualify. However, when some school districts reduced their tax rates, those homeowners did not see a reduction in their tax bills due to this frozen value. The new law would reduce the frozen value by the same percentage as the reduction in a school district’s tax rate, starting in the 2023 tax year.

Because there are different property tax laws for Texas elderly and disabled property owners, reforms to their tax rates must be made by constitutional amendment. Texas voters will need to approve this on local election ballots in 2022. If approved, the amendment to authorize this tax cut would take effect in January 2023.

Texas Property Taxes

No one likes to pay taxes and Texans don’t like hearing that our property taxes are higher than most other states. However, we do not have state income taxes like many other states. Texas counties set their own property tax rates, and they vary across the state. Counties with smaller populations tend to have lower property taxes. The average property tax rate in Texas is 1.8 percent of the property’s appraised value.

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Texas 2021 Real Estate Related Updates

Real estate topics took a back seat to big issues like the pandemic and power grid failures in 2021 with the Texas Legislature. Of the 3,800 bills enacted into law, real estate still got a little attention. Some of the welcome changes coming next week are due to lobbying efforts from the Texas Association of Realtors and the Texas Land and Title Association. New real estate contracts reflecting these laws are now available and are required to be used by Realtors starting September 1, 2021.

Homeowner Associations 

The law from Senate Bill 1588/House Bill 3367 requires more transparency from HOA management companies. It puts a cap on the costs for obtaining subdivision information, resale certificate updates, and HOA transfer fees. The limit for the fee to obtain subdivision information will be $375 and the fee for an updated resale certificate is topped at $75. 

The new law also states that the HOA’s publicly filed management certificate must disclose the amount of any transfer fees charged with the sale. That information will be made available in the Texas Real Estate Commission (TREC) database. This will allow agents to look up the transfer fees on a property prior to listing it for sale or submitting a purchase offer for their buyer. It offers protection to homeowners and buyers against unreasonable fees and surprises. Additional consumer privacy protections for homeowners are included in this new law. 

Effective September 1, 2021, the law is being phased in. TREC will establish a database to accept management certificates from HOAs and make it available to the public by December 1, 2021. HOAs must electronically file their management certificate with TREC no later than June 1, 2022. 

Unfortunately, some HOA management companies (and companies that provide HOA resale certificates and documents) have already found a way around the new law limiting their fees. A resale package from Condocerts.com last week included a transfer fee (normally paid at the time of closing) and a processing fee. Instead of $375 for the resale package, the upfront cost to the seller was $650. Fortunately, we had enough time to avoid their outrageous rush fee.

Public Improvement Districts (PIDs) 

House Bill 1543 is now a law that requires a property owner in a PID to disclose that the property is in a PID and certain details of the PID prior to executing a contract with a buyer. The PID notice must be acknowledged by the buyer and seller and will be recorded in county records at the time of the sale. A PID is a special district created by a city or county. It allows a special assessment tax against properties within the district for improvements or maintenance. The existence of a PID on a property can currently be found in the county appraisal district tax records. More details of a PID must now be filed with the county deed records starting September 1, 2021. 

Appraisers 

House Bill 2533 specifies that unless a lender requires a full appraisal for a financial transaction, a licensed appraiser is not required to comply with Uniform Standards of Professional Appraisal Practice (USPAP) when performing an evaluation. If an appraiser performs an evaluation that is not in compliance with USPAP, then it must include a notice stating that the evaluation is not an appraisal performed in compliance with USPAP. This takes effect on June 14, 2021. A new Statute of Limitations law from House Bill 1939 provides for a two-to-five-year limit for lawsuits filed based on an appraisal or appraisal review. This excludes lawsuits based on fraud or breach of contract and is effective September 1, 2021. 

Quitclaim Deeds 

Transferring title in Texas with a Quitclaim Deed should become easier after September 1, 2021. This law will allow a purchaser of a property with a Quitclaim Deed to be considered a bona fide purchaser if at least 4 years have passed since the deed was recorded. Title companies are wary of quitclaim deeds because, unlike a warranty deed, they only convey whatever interest the signer may or may not have in the property. The signer of a quitclaim deed may have limited or no ownership of the property. There is no warranty of full ownership being transferred. This new law may remove quitclaim deed concerns if at least 4 years have passed. It does not affect quitclaim deeds recorded prior to September 1, 2021.

Mechanic’s Liens 

A new law extends the description of lien rights. Subcontractor liens must now be filed within a particular time period and notice requirements are detailed. Limitations for filing suit to foreclose a lien and who must be licensed to file a lien are now updated. 

Judgments on Homestead Properties 

Using a homestead affidavit to remove a judgment on a property just got clarification. Previously, a homeowner seeking to remove a judgment in order to sell or refinance would sign a homestead affidavit, send it to the creditor, wait 30 days and see if the creditor disputes the homestead claim. The new law allows the owner to sign a homestead affidavit and record it with the county at any time. The creditor is still notified of the recording and has 30 days to dispute it, but the homeowner can get the affidavit and issue of homestead resolved ahead of a transaction. 

 Racial Restrictive Covenants 

Some older subdivisions in Texas have original restrictive covenants regarding certain racial or ethnic groups. These have been invalid and unenforceable for decades but they still show up in the county records as legal documents. This new law allows a property owner to request that the County Clerk actually remove the language of the racial restrictions from the public record. The county would remove the document and attach another document stating that a restriction that is void has been removed. While a good concept, this law just changes the county paperwork. 

Freedom of Expression 

House Bill 3343 prohibits insurers (like title insurance or homeowners’ insurance) from discriminating on the basis of political affiliation or expression. 

 And if the rules of real estate are driving you to drink, then you may have notice House Bill 1024. Restaurants may start including alcoholic beverages in delivery and to-go orders. It has no effect on real estate transactions but cheers to that law anyway.

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Are Cash Buyers Better? 4 tips to decide

Why would a home seller prefer a cash buyer? After all, the seller gets their funds from the title company the same way regardless of how the buyer pays.

Sellers often do not care where the purchase money is coming from, as long as the buyer can get their loan approved in a reasonable amount of time – and the seller gets their money. However, the mortgage loan process can be time-consuming and comes with no guarantees.

Let’s look at four reasons why a cash homebuyer may be more appealing than a buyer getting financing:

1. Skip the appraisal.

Mortgage lenders require an appraisal of the property to determine if they will lend funds for the purchase of the property. Let’s face it. Home appraisals are unpredictable. In our changing market of rising prices, the uncertainty of an appraisal adds risk. There is less chance of the deal falling through if a home sale does not require an appraisal.

2. Disregard buyer loan approval.

When a homebuyer is financing a purchase, the sale is typically contingent on the buyer obtaining loan approval within a specified amount of time. If the buyer can’t get their financing, they can’t buy the property. They may get out of the contract (within a specified time) if there is a financing contingency. Despite promises and pre-approval letters, a seller cannot be certain that a buyer will qualify for their loan.

3. No property loan approval.

In addition to a buyer qualifying for their loan, the property must also meet lender’s requirements for the loan. Those requirements involve the appraisal, insurability of the property and any lender-required repairs. Depending on the terms of the contract, the buyer may be able to get out of the contract if the property does not meet the lender’s terms for their loan.

4. Quicker closing. 

The loan approval process often takes weeks. Cash sales can take just a few days to close. The vetting of both the buyer and the property condition is effectively skipped when no lender is involved. However, just how quickly a sale can close also depends on how ‘clean’ the title may be. The same title search is conducted on both cash and financed transactions to uncover all liens and encumbrances on a property.

Money is Money

A cash buyer will not actually be paying in actual cold, hard cash. In Texas, real estate must be purchased with “good funds” such as a wire transfer or cashier’s check. The title company has the discretion to determine which good funds it will accept.

All title companies are legally required to report any cash or personal checks used to close a transaction that total more than $10,000 to the IRS. This is designed to discourage money-laundering, tax evasion, drug trafficking, and other illegal activities.

Regardless of the source of the funds, the money passes hands through the title company.

Historically, most cash buyers are investors, second homebuyers, or older buyers who are using the proceeds from the sale of another property. Traditionally, the percentage of cash homebuyers in the U.S. hovers just above 20 percent.

For many sellers, a cash offer does not overly impress. Just because a buyer is paying cash does automatically earn them the right to bargain or jump to the head of the buyer line in this hot market. While there are advantages to picking a cash offer, most sellers will agree to an offer with terms that suit them best.

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The Texas Real Estate Contract Kick Out Provision

A Kick Out provision goes by many names in the world of Texas real estate contracts. It’s also known as a Knock Out clause, a Sale of Other Property contingency or simply a contingent contract.

A Kick Out provision is actually an addendum to the contract that takes into consideration the sale of another property by the buyer. It makes the contract conditional on the buyer selling a property they currently own.

“When a property goes under contract with this contingency, the property is shown in the MLS system as ‘Active Kick Out.’ This classification is different than the “Under Contract,” “Pending,” or “Active Option” categories. The property is technically not off the market.

According to the MetroTex Association of Realtors, the description of Active Kick Out, or KO, status is:

“Property has an offer contingent upon the sale of another property by buyer. Still available for showings and backup offers. Will expire on the original expiration date the agent entered.”

While this provides the buyer a benefit, in return it affords the seller a benefit as well. This Kick Out addendum essentially allows the seller to “kick out” the buyer if the seller receives an offer from another buyer. If the seller accepts an offer from another buyer, they must give notice to the current buyer and allow the current buyer the option to either remove the contingency or terminate the contract. If the contract terminates, the backup contract moves into the primary position.

As always, there are a couple of important items to note and to make this provision work.

 This option is not available to the seller without this addendum.

Our Texas real estate contracts generally don’t give a seller the option to get out. This addendum does. It gives the seller the opportunity to require that the buyer waive the contingency with a day or two notice AND it lets the seller require the buyer to put up additional earnest money if they waive the contingency. Many real estate advisors suggest the additional earnest money amount should be a “meaningful” enough amount to reflect the buyer’s sincerity.

This contingency on the sale of other property is actually a contingency on the buyer’s receipt of proceeds from the sale of other property.

The buyer must receive the funds from the sale of their property in order to move forward with this purchase. If the buyer doesn’t receive the funds from their sale, they may get out of the contract. This could become an issue if the buyer were closing their sale on a Friday afternoon and funds were not disbursed before end of business. They wouldn’t have the proceeds from their sale until the following Monday (or later if that Monday were a holiday). Or there could be some sort of judgment or lien on the property that prevents the buyer from receiving any proceeds from their sale.

Sellers sometimes welcome a Kick Out provision because it allows them to continue marketing their property while they have it under contract. Buyers can appreciate a Kick Out addendum because it reduces their risk if their sale proceeds are a necessity for their purchase.

Cooperation from both sides can help keep a deal from landing on its bum.

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