Overcoming the 3 worst fears of writing contracts in real estate investments
Website design By BotEap.comContract drafting is a paralyzing fear in real estate investing for investors buying or selling property. The usual thinking is that if the investor misses something very important, the deal will be lost, they may be liable for large sums of money if the deal doesn’t work out, or they will be doing something illegal and they won’t even know it.
Website design By BotEap.comOvercoming these fears is easy to achieve, but you must work in their order of importance to the investor, which can be done in minutes or hours. The result will be a long and rewarding career in real estate investing. The following are ways to help overcome these nagging fears for real estate investors.
Website design By BotEap.com1. The fear of omitting something very important in the contract.
Real estate contracting is as old as writing and each state has established some standards or the real estate agents in that state have established contract standards that they use to write purchase and sale agreements. Website design By BotEap.comAn investor can hire online, at a local office store or even from a real estate investing guru. It is strongly recommended that you use only contracts approved by your state BAR (bar association) or your local BOR (Board of Realtors). In general, using store-bought or guru contracts won’t expose you to too much liability, but you can run into major problems that aren’t obvious until you lose a large amount. Website design By BotEap.comIn particular, guru contracts are sold to protect the investor and often have separate buy and sell contracts. If these contracts are sent to the seller’s attorney for review, they could lose their deal because they are so onerous. You are better off controlling the contract that is standard in your state by using clauses or riders that favor your position. Website design By BotEap.com2. Fear of huge liability if the contract is done improperly.
Unless otherwise stated in the contract, when you are a buyer, your liability is limited to the amount of your deposit. If you haven’t made a deposit yet, your contract may not be valid in the first place, so always provide the minimum deposit the seller will accept. While it is impressive for other investors to give $1 or $10, if you are competing with another investor offering $100, you could lose the deal. Website design By BotEap.comAlways include a clause that your security deposit is not due until the inspection period is over, and ask for as long an inspection period as possible: with homeowners, I ask for and receive 20-30 days. This longer inspection period gives me more time to sell the property. You may not be able to use your buyers’ funds to close if you’re taking out a conventional loan to purchase the property; this is illegal if the closing is not done correctly. There are several ways to close the transaction using a buyer’s funds in cash. Website design By BotEap.comIf you are selling a property, your liability is broader because you may face a lawsuit called “Breach of Contract.” This lawsuit claims that the buyer had a valid contract with you and for whatever reason; You decided not to sell it to him. The easiest way to overcome this potential problem is to have your contract reviewed by an attorney and have clauses that protect the closing date, such as the buyer having to close on or before a specific date.” If the buyer doesn’t, you you have a breach of contract by the buyer, but your remedy is up to the limit of your deposit, unless you incur additional financial loss on the transaction that did not close Always get as large a deposit as possible from a buyer , generally at least 3% to 5% or a minimum of $2,000. Website design By BotEap.com3. The fear of doing something illegal and not knowing it.
This can be a well-founded fear for newbies. It’s best resolved by having a lawyer, not another investor, review what he’s doing. The benefit to the attorney is that you will put them as the closing agent. He’ll likely write the contract for you, but this can be a burden if you’re meeting with a buyer or seller and want to close the deal. Always use an attorney who does real estate closings as their primary business, not a general practitioner. You will find that while each agreement varies slightly, the actual number of contractual terms that vary from contract to contract is very small. Website design By BotEap.comIn short, your skill in drafting purchase and sale agreements is very powerful and must be mastered. This first requires you to read and understand a standard contract for your state and local municipalities if they are also required. You do not need a real estate agent to write a contract and it is not illegal for you to write a contract despite what many real estate agents tell you. Always ask an attorney to review what they are doing and pay them by making them the closing agent if possible. If the opposing party to the contract chooses the closing agent, ask them to follow through on the deal and explain that you will use it on the next contract where you control the choice of closing agent.
Real estate contracting is as old as writing and each state has established some standards or the real estate agents in that state have established contract standards that they use to write purchase and sale agreements. Website design By BotEap.comAn investor can hire online, at a local office store or even from a real estate investing guru. It is strongly recommended that you use only contracts approved by your state BAR (bar association) or your local BOR (Board of Realtors). In general, using store-bought or guru contracts won’t expose you to too much liability, but you can run into major problems that aren’t obvious until you lose a large amount. Website design By BotEap.comIn particular, guru contracts are sold to protect the investor and often have separate buy and sell contracts. If these contracts are sent to the seller’s attorney for review, they could lose their deal because they are so onerous. You are better off controlling the contract that is standard in your state by using clauses or riders that favor your position. Website design By BotEap.com2. Fear of huge liability if the contract is done improperly.
Unless otherwise stated in the contract, when you are a buyer, your liability is limited to the amount of your deposit. If you haven’t made a deposit yet, your contract may not be valid in the first place, so always provide the minimum deposit the seller will accept. While it is impressive for other investors to give $1 or $10, if you are competing with another investor offering $100, you could lose the deal. Website design By BotEap.comAlways include a clause that your security deposit is not due until the inspection period is over, and ask for as long an inspection period as possible: with homeowners, I ask for and receive 20-30 days. This longer inspection period gives me more time to sell the property. You may not be able to use your buyers’ funds to close if you’re taking out a conventional loan to purchase the property; this is illegal if the closing is not done correctly. There are several ways to close the transaction using a buyer’s funds in cash. Website design By BotEap.comIf you are selling a property, your liability is broader because you may face a lawsuit called “Breach of Contract.” This lawsuit claims that the buyer had a valid contract with you and for whatever reason; You decided not to sell it to him. The easiest way to overcome this potential problem is to have your contract reviewed by an attorney and have clauses that protect the closing date, such as the buyer having to close on or before a specific date.” If the buyer doesn’t, you you have a breach of contract by the buyer, but your remedy is up to the limit of your deposit, unless you incur additional financial loss on the transaction that did not close Always get as large a deposit as possible from a buyer , generally at least 3% to 5% or a minimum of $2,000. Website design By BotEap.com3. The fear of doing something illegal and not knowing it.
This can be a well-founded fear for newbies. It’s best resolved by having a lawyer, not another investor, review what he’s doing. The benefit to the attorney is that you will put them as the closing agent. He’ll likely write the contract for you, but this can be a burden if you’re meeting with a buyer or seller and want to close the deal. Always use an attorney who does real estate closings as their primary business, not a general practitioner. You will find that while each agreement varies slightly, the actual number of contractual terms that vary from contract to contract is very small. Website design By BotEap.comIn short, your skill in drafting purchase and sale agreements is very powerful and must be mastered. This first requires you to read and understand a standard contract for your state and local municipalities if they are also required. You do not need a real estate agent to write a contract and it is not illegal for you to write a contract despite what many real estate agents tell you. Always ask an attorney to review what they are doing and pay them by making them the closing agent if possible. If the opposing party to the contract chooses the closing agent, ask them to follow through on the deal and explain that you will use it on the next contract where you control the choice of closing agent.