Purchase Contract- Realtors or my own?

Question

When purchasing real estate, do you guys usually use the standard contract that the Realtor uses (working with a Ruhl and Ruhl agent right now) or do you use your own contract? I have a contract that I got at a Rich Dad training that my attorney said looked good, but the realtor wasn't too thrilled about using it.

My main concerns are that I want to make the contract assignable, have a finance contingency, an inspection contingency, and partner approval contingency. I'd like to develop something that I can use on every offer..

Something else I'd like to know: Let's say I make an offer on a property right away just to get it under contract, but I later find out the owner was inaccurate on his figures for utility expense or rental income or can not provide proof of the income- Am I able to rescind the contract due to the inaccurate or insufficient information? If so, what clause in the document would allow that to occur?

Mike Cumbie · Answer

Hi @Dan Kelley,

First off good luck in your travels.

Looking at your post it appears you are trying to put a contingency in for every possible thing and still get a deal on the property. In my experience that is not going to work at all. Generally speaking if someone wants to sell NOW, they will take a lower amount. However of course this means they do not want to wait while you go through 5-7 contingencies and have everyone come through their house and inspect it (Which they will then have to disclose in the future if something big is found) while waiting months for you to let that happen. Also knowing you can walk away right after getting your EMD back and going on to the next one.

Or they are willing to wait out a long drawn out process (think holding costs) but are going to cash out at the end for an offer that is above and beyond what they are asking. Especially in a hot market. Imagine this. You have a house for 100K on the market, you have 66K into it. You have monthly costs that equate to 800 a month and interest bearing down on credit cards you used to rehab it. You put it on the market and get the following offers.

1) 92.5K Cash close 5 days, no contingencies (1K EMD)

2) 101K Commercial loan contingency with preapproval letter, inspection contingency 60 day close. (1K EMD)

3) 92.5K inspection/finance/review of financials for rental/assignable/Double check of rental applications and leases/Random partner who will make final decision contingencies. (1K EMD) 60 day close

Which would you choose if you were selling? To get away with all of those you have to be in a big time buyers market with no other offers coming in or hunt for things that have been sitting dormant for many months (but there is always a reason they did not sell)

Keep learning you will get it.

Wayne Brooks · Answer

No, if it's a listed property the brokerage/agent are required to use the state forms.  You'll have a standard inspection clause which you could use to get out if you don't like the info supplied.  The contract is assignable if it doesn't prohibit it, and you can always alter the contract.  But, if the agent is awake, and thinks you're simply trying to wholesale, they'll likely tell the owner not to sign.  Then again, if the agent "wasn't too thrilled" as opposed to simply telling you "no way" in reaction to your proposed contract, they may not be very sharp.  "Partner approval" always give me a chuckle, as the offer heads for the trash.

John Thedford · Answer

Do you REALLY want to purchase the property or are you looking for an excuse to walk if you cannot assign the contract. Just about every contract has an inspection period for due diligence. This gives you the right to walk away. Typically, the inspection period allows you to determine condition, rental income, expenses, etc. If you need, you can also add in contingencies for financing. After reading your post, I too question what you intend to do.

Dan Kelley · Answer

@Wayne Brooks hmm... I was under the impression that any realtor is legally obligated to forward any purchase contract you choose to use (whether they like it or not.) My agent told me that they COULD use my contract if I wanted to but she advised against it. This was after she talked to her higher-ups within Ruhl and Ruhl.

What kind of things can I get out of with an inspection clause? Let's say I have a plumber and electrician walk through with me and find out that there's no possible way to every cost effectively switch utilities to tenant-pay... am I still stuck in the contract? I'll take the property either way, but just want to understand the limits of the contingency. Thanks for the input.

Purchase Contract- Realtors or my own?

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