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What’s In Your Real Estate Purchase Contract?

by Kevin Perk on September 25, 2012 · 11 comments

  
home purchase

How wordy do you need to be when purchasing a property?  Some purchase offer contracts can run into the dozens of pages.  I find the opposite works better for me.  I currently use simple and concise contract language that fits on about one page when I wish to make an offer on a property.  This contract language has evolved over the years and I use it for several reasons.

  • It keeps things simple.
  • Keeping it simple sometimes makes the deal.
  • I can carry a contract with me at nearly all times, because you never know when a deal will pop up.

So what is this contract language that I use? 

Here are the main provisions of my offer contract:

  • It states the address and legal description of the subject property.
  • It states the offer price, deposit amount and where the deposit will be held.
  • It states the property will be bought “as is.”
  • It requires the seller to supply all rental agreements, leases and an estoppel agreement (I will save that one for another post.).
  • It calls for the proper proration of all security deposits, rents, taxes, etc.
  • It requires the conveyance of a clear title.
  • It states who pays transfer taxes, recording fees and commissions.
  • If I have not seen the inside of the property, it requires a visual inspection of all units and other areas such as basements, common areas, etc.
  • It contains a clause on finding acceptable financing and acceptance by my business partner. Yep; these are the “outs” if I ever need them, because you never know.  But so far I never have needed them.
  • It states a date for closing but allows for the extension of that date to complete “any and all required paperwork.”
  • Space is also available if I need to add any additional clauses or conditions.

And that is about it other than lines for signatures.  You can download the full contract here.  We usually do add a few documents later on about lead based paint and a disclosure since my wife is representing me as a real estate broker.

So that is my basic, clear and simple contract language.  Of course it may evolve in the future as I experience new twists and turns, but so far it has worked for me and here is why I believe it has:

  • I fully intend to buy any property I make an offer on (unless something drastic arises),
  • I have my financing in place before I make an offer.
  • I do my due diligence (what I can) before I make my offer.
  • I buy properties “as is” and I know what I am getting into.

In closing you should always check with your own counsel and do what makes you feel comfortable (That is one thing that makes real estate great, there is no one, right way to do things!).  Also be sure to include any clauses or forms that may be required in your state or jurisdiction or by your local association of Realtors if you are a Realtor.  So what does your purchase contract say?  Let me know with your comments.

Until next time, happy investing.

Photo: Natalie Maynor

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{ 11 comments… read them below or add one }

Dale Osborn September 25, 2012 at 9:41 am

Nice assemblage of contract contents

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Kevin Perk September 25, 2012 at 10:56 pm

Thanks Dale!

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Brad Friesen September 25, 2012 at 10:22 am

Short and sweet! I love it! Thanks for sharing Kevin.

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Kevin Perk September 25, 2012 at 10:56 pm

You are welcome Brad. Thanks for reading.

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Craig Bosse September 25, 2012 at 2:05 pm

Keeping the contract simple is key.

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Kevin Perk September 25, 2012 at 10:57 pm

Agreed! Thanks for reading Craig.

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Sharon Vornholt September 25, 2012 at 4:09 pm

I keep mine nice an simple too; one page. In fact, I only add the part that pertains to landlords if it is currently a rental.

I don’t have anything about finding suitable financing financing, only subject to partner approval. I tell people up front that I am a cash buyer, but my partner will be bringing the cash so he has to approve the deal. Being able to buy a property “as is” for cash, is a great way to get sellers to accept your offer.

Most of the properties I buy are vacant, so I always add in the contract that I can put a lock box on the house for estimates and inspections. I have never had anyone say no to this.

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Kevin Perk September 25, 2012 at 11:00 pm

Good points Sharon. I usually will walk through with my contractors but if they need to go back later I will clear it with the listing agent. I might try your way on my next project.

Thanks for reading and commenting,

Kevin

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Shane in Tx September 27, 2012 at 11:42 am

I’m a fan of the one pager. We usually prepare a one page contract to have with us when we go to visit a house, very similar to these mentioned above. Sharon & Kevin, I like the “partner approval” clause. Thinking about this further, would this negate the need for a financing (hard money) clause, as Sharon does? I’m just wondering if it’s disingenuous to say partner when you mean hard or private money lender. I guess if I’m worried about it, just sign a JV agreement for that property prior to execution of contract?

Thoughts? I’m I understanding this correcty?

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Sharon Vornholt September 27, 2012 at 2:32 pm

Shane –

My closing attorney who also happens to be an investor, recommended this. It doesn’t scream “contingency” like subject to financing. I tell them upfront that I will have a money partner, and I have never had a problem.

Also, I am wholesaling with a double or simultaneous closing. The money is never an issue.

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Kevin Perk September 27, 2012 at 8:03 pm

Shane,

First, like I said in the article, I fully intend to purchase any property I write up an offer for. That said, things do happen. Your bank or lender may fall on hard times. You may get injured, there may be a natural disaster. You may finally get inside to see the property and discover severe structural damage. You need to protect yourself in case something drastic does occur, that is what these two clauses do. They give you an out if you need it.

Almost everyone has some sort of clause like that in their contract (if the don’t they better get one). The trick is not using them unless you really, really have to. You do not want to become known as the guy who makes offers and then does not come through. That just wastes everyone’s time.

Hope this helps you. Thanks for reading and commenting,

Kevin

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