BiggerPockets

First, I'm not a lawyer or legal expert of any kind...though I'm am somewhat familiar with real estate contract law based on my own investing...

Other than a legal description of the property (which should NOT just be the address), the agreed upon purchase price, the consideration (which may be the purchase price itself), the expiration date of the contract and the signatures, there is nothing else that is legally required in the P&S.

If you're comfortable with that, and the seller is comfortable with that, that's all that matters...

(Btw, I'm not saying I'd do it that way, and you may change your mind down the road, but legally, there's nothing wrong with it)

Originally posted by E J

As for the legal description, what do you recommend using? Would address & county PIN number work? I don't want to mess this up since I know that could invalidate the deal

I don't know which state you're in, but in my state (Georgia), for a real estate contract to be considered enforceable, the legal description needs to be one of two things:

1. A Metes and Bounds Description. This is essentially a survey that maps out the property from corner to corner via either monuments (natural or man-made) or longitudinal and latitudinal descriptors;

2. Recorded Plat Survey. When a builder or developer builds a house, they record the description of the land (perhaps a big tract of land encompassing a lot of smaller tracts of land) with the local recording office. Large tracts of land (Subdivisions) contain Blocks of land, which contain Lots of land. The legal description of a particular house would involve specifying (at a minimum) the Subdivision, the Block, and the Lot. By specifying where the Plat is recorded and these specific parameters of the property, you have defined a unique property that is considered a legal description.

Talk to your attorney and find out what your county generally uses, and include a legal description based on that information...

EJ, I'm puzzeled! On one hand you said if both of you were intent on getting to closing that's all that matters, then you voiced concern over getting things right so that the contract is invalidated. There are many issues in a contract than can arise at closing, that if not spelled out, can cause problems.

The best way to ensure your deal is not invalidated is to follow the advice of your attroney and use a standard contract and make an addendum to matter that need to be addressed.

Who ever said the contract is worthless until closing is not correct at all. If you're under contract and you don't get to close, the contract is the basis to settle any dispute. If it does close, it becomes ineffective as the closing has occured as agreed. If something pops up later, like fraud, the contract can become evidence of the intent of the parties.

I think your studies have brought you to a level of being a danger to yourself and others. FOllow your attorney's advice, isn't that why you have one, why do you call him if you don't listen?

Good luck, Bill

I think J Scott's response really explains my thinking. I do want the contract to be valid in that it will fulfill the necessary requirements for a closing to take place. Therefore, based on criteria #4 listed by J Scott, it would still make sense to care about correctly entering the legal description of the property even if I do not care about other clauses which would serve to protect my $10 earnest money deposit.

And the contract still seems worthless to me. Yes it is the basis to settle a dispute, but if that contract stipulates that in the worst case scenario, I lose an immaterial earnest deposit for breach, then I really don't feel too obligated in a legal sense. If the seller breaches, I really would not take legal action against them. I would rather move on to the next deal than go through a long and expensive legal process to possibly claim an assignment fee. Therefore, it appears that either party can back out of the deal at any time prior to closing without incurring any real repercussions. In my area, the seller customarily pays for title insurance and survey.

Morally, I would only intend to tie up the property if I thought I had a legitimate chance of finding someone to close on it. Otherwise, I would end up making no money and I'd have wasted my and the seller's time while hurting my reputation. But let's not forget- it's the seller's free choice to accept a contract with such minimal earnest money that the buyer wouldn't have a shred of skin in the deal. Unfortunately, the seller's alternatives often look so bleak that they don't have much say in the matter. Also, I'm not sure where you get the idea of fraud from...

But back to the contract itself, it seems like if I include all of the requirements for a VALID contract, and then add on to that any clauses from the standard contract which I feel are important or will offer me protections, I should be fine. My attorney is old and traditional. I would not disagree in any way that using the standard contract is the safest way to go. But if I can accomplish the same thing with a short contract that a seller can understand without seeking outside guidance, that can be signed on the spot, and is sufficient enough to carry out the transfer of real estate, then why should I not use it? I DO want to avoid legal issues, but it is going to be clearly written in the contract that the seller agrees in the event of breach of contract by the buyer, the seller's liquidated damages are limited to the earnest money deposit.

True that may happen but you also need to consider how many offers were accepted because of the simple contract where the deal may have been lost if the seller requested time for their attorney to review a complex contract, allowing other investors time to come make a better offer.

If you do know which specific contingencies have caused the problems you know of, I would be interested in hearing them so I can include simplified versions of them in my contract

Originally posted by Charles Perkins

I'm not aware of all of the details in another case, but essentially the property is tied up and the buyer can not do anything with the property while a clause is arbitrated that essentially allowed the seller to consider other buyers.

That would be my biggest concern...that the seller just hand you back your $10 and find another buyer, and not necessarily be in violation of the contract based on how it's written (or if it's not enforceable)...

Excuse me but before I respond to the rest of what's been said, I must first firmly reject Bill's statement that the reason I want a simple contract is because I lack the knowledge in the subject matter. I have absolutely no problem understanding this contract or legal terminology in general. I have taken several law courses, some entirely dedicated to real estate. We have gone through several court decisions which interpreting was far more difficult than the language of a standard contract. I have also completed the majority of our state pre-licensing class in addition to several other college real estate courses. Therefore, topics such as forms of ownership, easements, landowner rights, liens, tenancy, mortgages, escrow, brokerage, appraisal, etc. are nothing new to me. I'm not sure where I come off as stupid to you, but I can assure you that my reasoning for the 1-page contract, as you said, is to gain a competitive advantage - not because I don't know what the standard one says, which by the way is 12 pages here. On the other hand, I would not expect somebody who doesn't specialize in real estate or law to understand the contract without it being carefully explained.

Continuing on, I can definitely agree with what was said about the presentation of the offer. This is something that will require practice no matter what contract is being used. I am sure the full contract, which I have read over several times studying, can be explained in a matter that would serve to build trust between the seller and buyer. But once again, if a process can be simplified, why not do it? My biggest pet peeve has always been when things are done in an inefficient way. I honestly think it's terrible how legal documents use such ridiculous language to accomplish things which could be just as easily spelled out in plain English. That way, EVERYONE could understand what they are agreeing to, not just lawyers or other highly educated individuals. So in addition to the possible marketing advantage, I suppose part of my desire to use the short contract is the result of wanting to "stick it to the man" and show that contracts don't have to be so complicated and that everybody could and should be able to understand them.

Anyways, my gripe with the standard contract is it comes with a lot of terms that I don't want to agree to. I'm basically going to 'X' out most of the paragraphs anyways. Like for example, the inspection paragraph in this contract has written into it that there is a 10 day inspection period where the buyer may cancel the contract based on the inspections. I want to allow myself the right to inspect, but I don't want to have a 10 day contingency. Therefore, I'm going to have to cross this paragraph out and put in my own with the terms I want. I'm really surprised they didn't leave blanks on these kinds of things so that the contingency period can be any number of days you want. And then of course, this paragraph is followed by a HUGE paragraph about mortgage contingency, which of course won't be applicable dealing with cash buyers. So right there I've just crossed out an entire page. I think it's silly that every single time I sit down with a homeowner, I am crossing out what I don't want and adding in what I do want. Why not just make the changes permanently written in and print it that way?

Lastly, I do have an important question, and this is an area where I see my attorney's concern. In Illinois, it is written into the contract that the seller's attorney will pull title and prepare the closing. When I told my attorney how I wanted to receive payment via an assignment fee at closing, he told me that the seller's attorney will not know to include the assignment fee on the closing statement, or even know the deal was assigned at all. There is no mention in the contract about an assignment fee, so how would the seller's attorney know what to put? Do I need to contact them and send them a copy of the assignment of contract? Should I rewrite the clause so that the buyer's attorney will pull title (at the seller's expense) and prepare the closing documents? I could even play this off like I'm doing the seller a favor. Like saying oh don't worry about dealing with your attorney or getting title insurance, I'll take care of it for you since I already have a team in place to do it. I can just give you the bill instead and that way you don't have to worry about a thing. And as long as title comes in clear or gets cleared, you will be refunded for the insurance at closing. Since I already factored closing costs when I made my offer, they're really still paying for it ;)

I like this discussion and I hope that someone who does us a 1 page contract regularly will chime in and share how they think it has affected their dealings. Any legal problems? More agreeable sellers?

EJ, in a previous, non RE business, I got fed up with the long contract drafted by my lawyer and decided to shorten it. I basically kept the same thing but made the font size very small and made it into two columns and played around with Microsoft Word until it fit on one page - pretty much with no margins. It worked really well for me and made it seem like a very simple contract. Perhaps you can try that.

I also think that you should carefully evaluate the competitive advantage idea. It may be nice to be able to show someone that you have a short contract that is easy to read. But it can also be beneficial to be able to tell someone that yours is the standard RE purchase agreement used by everyone else. You will have to make the call on which one is the better approach for your business model.

Finally, Charles is right that most of the provisions in the standard contract are there to cover various situations that can occur. But I do see a lot of waste in contracts to protect realtors, etc. and I am sure you can get rid of that stuff if you are not using a realtor. The AZ contract, to me, seems heavily in favor of the buyer. If you are a buyer, I would suspect that you may like a lot of that stuff.

Good luck.

Great information here guys. I learned quite a bit reading through this thread. Thanks a lot. Could someone post an example of a viable 1 page purchase contract? I'm still new to all of this...

I was actually a bit worried about that J. What should I do to avoid copyright infringement?