Real Estate Contract Clauses – Be Careful Out There!

Just when you think you have seen it all something new comes up.  A Student called and asked me to look at a contract he had received back from a seller.  The contract had a large number of changes that were either struck out or written over.  While I don't give legal advice I do have an opinion on real estate contract clauses and changes sellers or buyers make to an existing contract.

There were the usual changes like shorter inspection period and closer closing date.  But the eye-opener was the changes to the specific clause that discussed what happened if the seller defaulted, under what conditions he could cancel and what recourse the buyer had in this situation.

The strike-outs in this clause were carefully crafted to give the seller a "Get Out of Contract" at any time.  There was no recourse including the buyer filing a Breach of Contract lawsuit.  This alteration to the contract is wonderful if you are the seller.  I am sure it will be used by some investor from here on out.  As for the buyer it is an abomination!  If a seller can back out any time before closing and the buyer has no recourse, why even have a contract?

Essentially this modified clause allows the seller to keep marketing the property.  If he finds a higher offer to accept it without worry about recourse from his current buyer!

Who in their right mind could be so callous and outright mean to put in a clause like this?  First one I can think of is the attorney for the seller.  The attorney either had a ton of experience or was just out of law school.  Based on his other changes I think the latter.

Secondly, the other people who actually do this ALL THE TIME are lenders who are approving short sales.  Their "addendum" to your contract with the home seller states that they have the right to cancel their approval up until and including the day of closing without any recourse to them.  You can sue the seller for Breach of Contract as he is always willing to sell but you have to pay off his upside-down mortgage to close!

In summary, if you don't read every page and understand every clause in contracts you sign, you could be paying for some very expensive mistakes in your investing career.  While I joke with my wife that "real men don't read", not reading before you sign anything can be very costly and may be career ending.  If you are afraid of legal issues and don't understand real estate law, simply have an attorney "shadow" your transaction.  Pass the burden of getting it right to him.  His insight and overview will be the cheapest insurance you can buy before you need it.change your life mentoring click button j 300x236 1

To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.

Real Estate Contract Clauses – Be Careful Out There!

Just when you think you have seen it all something new comes up.  A Student called and asked me to look at a contract he had received back from a seller.  The contract had a large number of changes that were either struck out or written over.  While I don't give legal advice I do have an opinion on real estate contract clauses and changes sellers or buyers make to an existing contract.

There were the usual changes like shorter inspection period and closer closing date.  But the eye-opener was the changes to the specific clause that discussed what happened if the seller defaulted, under what conditions he could cancel and what recourse the buyer had in this situation.

The strike-outs in this clause were carefully crafted to give the seller a "Get Out of Contract" at any time.  There was no recourse including the buyer filing a Breach of Contract lawsuit.  This alteration to the contract is wonderful if you are the seller.  I am sure it will be used by some investor from here on out.  As for the buyer it is an abomination!  If a seller can back out any time before closing and the buyer has no recourse, why even have a contract?

Essentially this modified clause allows the seller to keep marketing the property.  If he finds a higher offer to accept it without worry about recourse from his current buyer!

Who in their right mind could be so callous and outright mean to put in a clause like this?  First one I can think of is the attorney for the seller.  The attorney either had a ton of experience or was just out of law school.  Based on his other changes I think the latter.

Secondly, the other people who actually do this ALL THE TIME are lenders who are approving short sales.  Their "addendum" to your contract with the home seller states that they have the right to cancel their approval up until and including the day of closing without any recourse to them.  You can sue the seller for Breach of Contract as he is always willing to sell but you have to pay off his upside-down mortgage to close!

In summary, if you don't read every page and understand every clause in contracts you sign, you could be paying for some very expensive mistakes in your investing career.  While I joke with my wife that "real men don't read", not reading before you sign anything can be very costly and may be career ending.  If you are afraid of legal issues and don't understand real estate law, simply have an attorney "shadow" your transaction.  Pass the burden of getting it right to him.  His insight and overview will be the cheapest insurance you can buy before you need it.change your life mentoring click button j 300x236 1

To your limitless success,

Dave Dinkel

Real Estate Mentor Program Founder

Frequently Asked Questions

1. What Should I Do If a Seller Ghosts Me?

If you feel you have been ghosted, act decisively and quickly. If you have tried texting and calling, it's time to drive by the seller's location. I always take the recorded Notice of Interest or Memorandum of Contract to leave, so the seller knows it exists. Go by at a time when you know they will be there and don't be confrontational, just get the facts.

In our experience with new investors, the chances of losing a deal with no contract is likely over 85%. Verbal commitments do not apply in contract law; get everything in writing, especially contract changes.

Different 'gurus' have different opinions, but our experience is finding motivated sellers and then a buyer for your deal. Ideally, you should be finding motivated buyers from day one, so you are ready when you find a seller. Buyers are easier to find as you can see at https://davedinkel.com/products/

Prevention only comes about by thinking a Black Hat wholesaler will be coming after your deal. First, educate the seller that an unscrupulous investor may come by and illegally offer more money, have the seller sign your "Notice to Homeowner," stating that he understands he cannot accept another offer.

There is nothing illegal about changing their mind, it is called seller remorse and occurs about 25% of the time. However, if they have signed your contract, it can't be cancelled for any reason unless acceptable to the investor/buyer.

If price is an objection, you need to find out how important it is to sell fast and for cash. If the seller isn't under a time constraint, has a money issue, or has a personal dilemma, he may not agree to the price you need. Offer to help move and build it into your price before you make your offer. However, never give the seller money; only pay the moving company, and only after closing (escrow with a closing agent). If fear is the seller's issue, break it down into what the real problem is and answer their objections one at a time.

You can get to the root of motivation for a seller by asking a few questions. First, "Why are you selling?", "How soon can you close?", and Are you ready to sign an AGREEMENT today, if not, what do I have to do to make you comfortable?'. The answers to these questions will determine the truth about your seller's motivations.

The best times to involve your attorney in your deals are to have him review your contracting, review the signed contracts from the seller and end buyer, have him open escrow and start the title work, negotiate with city or counties for lien reductions or mortgage payoffs with lenders, and to close the transactions." Your attorney is not the adversary; it's the opposing party's attorney who is a deal killer, and having your attorney allows him to help overcome this obstacle.

The key to successful prospecting and bringing back deals that didn't close is to follow up until the property is transferred in the public record. Some of our deals have been where the seller came back to us months and years later because they felt comfortable with us and not the other "pushy" investors who contacted them.

Your contract's most important clauses are inspection period (as long as possible), when the EMD must be deposited if at all, your ability to access the property, any added clauses specific to the property that will protect you against seller claims later that were verbal only.

Visit davedinkel.com for full privacy policy, terms of use, etc.  Be sure to contact us through the website at davedinkel.com if you have questions or concerns ([email protected]).  Results mentioned in this presentation and any video, article, and/or material related to Dave Dinkel and his associated businesses are not typical nor are a guarantee of any earning potential.  No advice is to be construed as legal, accounting, or professional advice EVER.  Please consult related licensed and qualified professionals before taking any action.  No person(s) mentioned in the articles and /or shown on videos received compensation in any form for their opinions.