Wholesale Contracts Purchase/Assignment

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There are a number of on-line services that offer contract packages for investors

Ask around you local REIA... they will have "State specific" contracts they will probably share.

When I started wholesaling, I used a contract from a course I had purchased but it received negative attention from local investors, home owners and attorneys. I then decided to use the standard Texas Real Estate purchase contract that agents must use. It is 8 pages compared to my 2 pages but it doesn't raise eyebrows like my first one did. I just had to add "and or assigns" on the purchaser line so I could assign the contract if I chose to instead of doing a double close.

I would assume Tennessee agents all use the same one also. That shouldn't be difficult to get a copy of. As far as an Assignment addendum, use whatever you can find online. I've used a few different ones and neither the end buyer or title agent seemed to care.

Good luck with your business.

If you invest in a good mentoring program, especially one who operates on-site, you will get contracts from him or her, and even more importantly, training on how to properly use them.

Here in Colorado, the standard Purchase/Sell  Contract is 17 pages long and very much buyer friendly.  I also am struggling with how to fill out all the dates since I don't know who my end-buyer is when I originally fill out the form.

I am afraid that 17 pages is a lot to go through with my off market seller.

Does anyone agree/disagree?  Would appreciate any feedback.

@Karen P. The contract is challenging and the dates can vary. Some of the contract lingo can be difficult to explain and you may need an attorney to explain the contract to the client. I usually put in dates based on x number of days past my MEC-(Mutually Executed Contract). There is also a form for amending the dates if you need an extension or if the buyer wants to close quicker. 

Thanks Kevin,

Do you wholesale in the Denver area? The MEC you would base on the contract signing between you and the seller? And in the section of 4.4 do you just check the box of Does Not have funds that are immediately verifiable and available....? What do you check in 4.5.3? All of them? Do you allow your buyer to have all of the "outs" that are available in this contract? Do you help the seller gather the documents needed for the HOA forms if they are unable to do this on their own? Do you have them fill out an inspection disclosure form and a lead base paint disclosure form? A lot of questions, sorry. I have studied this contract and gone over it with my lawyer. I just worry it is too complicated for an off market seller and has too many outs for my buyer. I would think an off market seller would be going off market because they want a fast and easy closing. I am up here in Fort Collins really educating myself as well as getting a lot of great help from my local REI group. If you can answer some of these questions it would be appreciated. Thanks.

@Karen P. We always prefer using the Colorado Real Estate Commission form contract (i.e., the 17 page contract).  Although it is very buyer friendly, that makes it is very wholesaler friendly as well.  Plus it is the contract that every buyer (and probably seller) expects to see, especially seasoned real estate investors, which makes it easy to pitch.  Finally, if you're worried about buyers walking away from the deal, one option would be to make the earnest money non-refundable.

@Karen P. Message me in private I will find a time to discuss this. I have helped some of clients work on wholesale deals. The best option is to have verifiable funds and I have worked with clients that have proof of funds letters. Hopefully, as you are putting your deal together you have a few investors whom you have identified would be good for the process. You want the buyer to have some outs because you want them to be able to make money off the deal also. If the purchase is a bad deal, the best thing is not closing if you can't find a way to make it a good deal.  

Originally posted by @Karen P. :

Does anyone agree/disagree?  Would appreciate any feedback.

 Do yourself a favor and take some of Greg Parham's classes at First Alliance Title. He has several classes on contracts. He even has boilerplate language for assignment as he is an attorney. 

Countless hours have gone into the Contract to Buy and Sell. I would avoid anything else, and just add the assignment in "additional provisions." They did away with the check box assignment this year.

The way I explain it to my wholesalers to tell people is this: "This is the contract that 95% of real estate transactions in this State use. It has been vetted by attorneys up and down." That way it also limits objection like, "well I need to have my attorney review it." It also has protections in place and covers quite a bit.

Please note: Realtors cannot add language in additional provisions unless it either comes from you or an attorney. We can only fill in the contract based upon what you want. 

Hi Matt,

That is awesome!  I just registered for the class.  It sounds like instead of going with a more simple contract...I just need to get the DORA contract down well and be able to present it to my sellers.  My real estate lawyer has already added in the provision for assignability and I have gone to one class on the contract and read up on it.  But I will take this class and hopefully that will cement everything.  I sure appreciate your time and advice.  Karen

@Karen P. you are over thinking it. Real sellers want to know 2 things. How much are you paying me and when do we close. The rest is noise and you only dig it out if things go really bad. As a buyer I make sure they understand the inspections clause and the due diligence clause because those are my outs. I fill the contract out in front of them and let them read it if they want. Most fall asleep after the first page. 

Federal law requires that you have the lead paint completed. 

The other documents. The simpler you make it for the seller and your wholesale buyer the better. I always try and get them to fill our the  property disclosure. If they lie on that and there is an issue you have something to go after them with.

Don't get me wrong it's good to know but usually not an issue. If you want have a friend role play a signing with you. That will get you accustom to answering questions. 

Just to be clear. No reason to use anything but the state forms and it will likely harm you in court if you don't.

Anyone know anything about copyright laws? If you violate law in writing your contract then your contract is voidable. Our local board of Realtors turns a blind eye simply because it wouldn't be good publicity to sue non-Realtors for using their contracts, but that doesn't stop a judge from knowing and tossing something out.

Contracts that you buy are different, those are yours.

A contract you obtain from your attorney is yours to use as well, you paid them.

If you're a principal party to a contract you can write it yourself. 

Learn contract law and what is customary in your area, a review of your local agent's contracts can show you what is customary, just say it in a different way. There are certain standard phrases used in RE contracts that in the public domain, understand those as well as the meanings. 

Review your grade school grammar and the meaning of words such as "will" "shall" "may" deadlines are clearer if you say 12:00 P.M March 10, 2016. Saying "shall deposit $1,000.00" doesn't say much, to or with a seller, my bank, your bank, a title escrow company..... who gets a deposit? Or did you really mean a down payment? State law defines deposits and down payment differently and one or the other may not be non-refundable. A short business law course is probably needed by most RE investors, especially those who don't have a prior business background starting out.

You pay an attorney once to review your contract, might be $150.00 but you use it for 100 deals or 250 offers, is a dollar too much to pay to know you have a good contract that is compliant with laws and local customs? :)       

Thank you Bill S and Bill G for the quick reply.

I did go through my real estate lawyer with the contracts- both the DORA contract and the assignment contract.  I think I am good there.  You are probably right in that I am overthinking it. :)

I have done a mock DORA contract once and I will do a couple more.  I have gone through my rehab costs with a contractor and built a spreadsheet based on those costs.  My postcards are ready to send.  I will take this contract class next Thursday and then I am off and running.  

Your advice has been invaluable.  I sure appreciate it.

Thanks,

Karen

Originally posted by @Bill Gulley :

Our local board of Realtors turns a blind eye simply because it wouldn't be good publicity to sue non-Realtors for using their contracts, but that doesn't stop a judge from knowing and tossing something out.

 The Division of Real Estate for Colorado has "State Approved" forms that are accessible on their website. As far as I know, everyone is free to use them.

Originally posted by @Matt M. :
Originally posted by @Bill Gulley:

Our local board of Realtors turns a blind eye simply because it wouldn't be good publicity to sue non-Realtors for using their contracts, but that doesn't stop a judge from knowing and tossing something out.

 The Division of Real Estate for Colorado has "State Approved" forms that are accessible on their website. As far as I know, everyone is free to use them.

 Yes, that can certainly be the case, generally you can look in the bottom margin for the copyright, several states have state approved forms, Texas requires the use of theirs I believe, at least our attorney used them on our Texas deals. Some don't have such contracts, the BOR pays attorneys to write them. 

If your state does have them, you should use them. 

BTW, changing a contract, best practice is draw a single line through the change and all parties initial at the beginning and end of the line. This way you can still read what was not agreed to or changed. Use an addendum to modify to your taste. :)  

Kevin Grinstead, thank you for the time you spent with me going over the contract.  Very much appreciated!  And Matt M....I took Greg Parham's class last week and it was awesome.  I think I am ready to go.  These posts have been such a big help.  Thank you all again,  Karen