What are the typical financial and other obligations when getting a property under contract? I ask as a lady on one of the podcasts said she got 30 houses under contract in a month, but then only went through with a handful of those?
Thanks in advance
Generally it requires earnest money to secure a contract. If a contingency is not met, you should get your earnest money back. Even if you don't lose your earnest money, backing out of 80% or more of your contracts means you are wasting a lot of everyone's time and effort. If they were MLS properties your ability to have your offers taken seriously in that market would be short-lived.
Contracts on HUD/REO properties seem to be a little more dicey than typical, but that seems like a very bad percentage.
Thanks - yes earnest money was my understanding - I just couldn't understand the strategy of getting scatter gunning to get so many under contract, even if the earnest is $1500 and you keep 20, still 15k down the drain.
What happens if the contract was contingent on getting financing and the financing doesn't go through? Is the earnest money still lost?
I think you are referring to the podcast with Ophelia Nichoson. I was just listening to the post cast this morning in the car and thought the same thing - how can one get 30 properties under contract at once.
Reach out to her on BP ... I'm sure she'll share her strategy with you.
An earnest money deposit is not required to make a contract legal. However, if you're putting offers in on a listed property, then the agent is almost certainly going to require one so they know you're a serious buyer.
So, in theory, you could get 30 off-market properties under contract with no up-front money out of pocket. However, with that being said, you should not be putting multiple properties under contract knowing that you can't/won't close on all of them.
That's not to say that you have to close on a property if something should come up during your due dilgence period that wasn't initially disclosed. That's what contingencies are for. I'm talking about a scenario where you put 30 houses under contract knowing you can only close on five. That's just bad business in my opinion.
Not understanding why someone would get so many homes under contract then only close a small percentage unless they were contracts on properties that were never investment grade to begin with. I can assure you she's not risking E/M on each one...in fact, I'm more than certain she's seldom got any at risk.
If you have a financing contingency (such as the one commonly used in TX), the you get your E/M returned if you provide timely written notice to the seller of your inability to get financing.
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