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Why Use Clauses in your Negotiations.
| | Wednesday, September 01, 2004 @ 08:00 AM EDT
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Contributed by: John Michael
John Michael Properties
Read more archived articles about Managing
Buying a property is a complex process to be sure. And nowhere does it get more complicated than in the sales contract itself.
The purpose of a subject clause contained in an offer to purchase is to set out a specific condition that must be fulfilled before the sale can go through.
Clauses are designed to enhance profits. There are even clauses that are worded in such a way that allows you to put up "earnest money" even if you
do not yet have the cash to cover it! Other types of clauses I use are:
“And/or assigns” or “and/or Nominees”
Inspection Clause
Choice of Escrow Company
Right to Extend
Subject to a satisfactory Termite and Carpenter Ant Inspection
Subject to a satisfactory approval of all Contracts and Addendum's
All Earnest Money deposited by Buyer shall be held
Seller shall satisfy/provide Buyer with copies of
Seller will renovate
Seller will provide Buyer with a Certificate showing the Building to be free and clear of Asbestos Insulation and covering of any kind.
And or assigns
Subject to partners approval
Subject to inspection
Subject to keys before closing
Subject to move in condition
You take control when you use clauses and as an investor control over contracts only improves your ability to buy, sell and hold more properties with limited
There may be no such thing as a perfect real estate purchase contract, but getting this legally binding document right will save you money, time and heartache
Many residential purchase contracts are crafted with standard real estate boilerplate. Many firms, in fact, use preprinted forms. While preprinted or computer-stored forms have improved the efficiency of the home-buying process, it can be at the expense of the buyer. So it pays to get a copy early on of the contract you're likely to use. Read it and don't hesitate to rewrite or toss out what you don't like. If you'll be working with a pre-print, get a copy when you first start looking for a house and highlight terms or conditions you like or may want to modify when you're ready to make an offer. Circle what you dislike, too; it's a good way to catch buyer-unfriendly fine print. After that, you're ready to sit down and write an offer you hope the seller won't refuse.
You should include:
Time to respond: Specific amount of time for seller to answer your offer. Contingencies also should set time limits.
Seller’s responsibilities: Include passing clear title to the property, maintaining the property in its present condition until closing, making any agreed-upon repairs and delivering the property clean and free of personal possessions and debris.
Disposition of deposit: Who gets your good-faith deposit if contract is terminated. Varies with circumstances, such as failure to get loan approval (seller would get deposit) or unsatisfactory home inspection (buyer would get deposit).
What stays: What fixtures and personal property is included in the sale. Make your list detailed; any verbal agreements are not binding.
Terms of withdrawal: What conditions allow you or the seller to withdraw from the agreement. You might not think you'll need them, but it's good protection.
Final walk-through: Your chance to make sure the house is in order shortly before closing. Contract should specify seller's responsibility should walk-through be unsatisfactory.
An escape clause, also called a release or kick-out clause, is a provision in a purchase contract that gives the buyer the opportunity to cancel the contract under certain conditions. Escape clauses are most common in purchase contracts for investor's contingent on the inspection and or subject to partner's approval.
Who should the contract favor? You the buyer or the seller?
Not using clauses will place the seller in full control!
Note: John Michael is the author of many guides that can help you become more successful as an investor. See http://www.thecreativeinvestor.com/ChanPart-JohnMichael.html
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