Getting out of an AS-IS Cash purchase?

Question

Hey BP!

I'm looking to go into contract on a 3 properties that I have not seen yet. I know the area because I have 2 properties there now so my only hesitation is how much work is needed. I know from the podcast as well as from REIA meetings that seasoned investors go into contract first and then do their due diligence. I invest out of state so I've wasted a lot of gas checking out properties first only to have my offers be beaten out. So I'm very interested in changing to the offer acceptance then due diligence route. My hesitation is how easy is it to actually back out.

What should be in the contract to ensure that I'm able to renegotiate the price or back out completely if the scope of work is not represented accurately? These are AS-IS sales and I'm buying cash.

Thanks all!

Jay Hinrichs · Answer

I would say 99% of MLS or board of realtor sales contracts have a due diligence section in them by default you can waive it or make offers sub too it.. 95% of people buying real estate use a due diligence clause unless you have a smokin deal and don't want to risk losing it in a very competitive market like say VEGAS right now.

Elizabeth Klingseisen · Answer

Yes, contingenies in your contract based off inspection is always great. Another is based on business partner approval within so many days. That's another loophole to back out :)

Wayne Brooks · Answer

@Abena Cannady

Yes, an inspection contingency is normal, typically 5-10 days so 3 days should not cause objections.

As for the “partner’s approval”, that’s garbage promoted by wholesaler gurus and no informed seller would accept it.

Bill B. · Answer

Don’t add both. You only need one and inspection is more reasonable than partner approval. You’ve pretty much waived a big red flag saying I’m going to renogotiate or bail. If I saw that contingency I’d say ask your partner and resubmit your offer after they approve. If you can’t wait for them to approve before making an offer you’re saying I’m offering a smoking deal and just want to lock up my property and other buyers may be coming soon. 3 days is reasonable.

Abena Cannady · Answer

Thanks guys! I'm going to add a 3 day inspection contingency. I also like the partner approval contingency as well.

Jack B. · Answer

While the inspection contingency will allow you to back out, it won't allow you to re-negotiate the price. Usually they will either make repairs or give a small dollar amount concession toward closing costs. I've never seen one where they reduce the price based on inspection. Only for the appraisal contingency.

Chris T. · Answer

I agree with @Bill Brandt, 1 contingency is more than enough.

Like @Jay Hinrichs mentioned, there should be a due diligence in your state's contract. Go through it carefully, or ask an attorney for help.

You want to show that you're serious about closing when you submit an offer. Too many contingencies will kill it, even if you are offering cash.

Christine Kankowski · Answer

add a 3 day contingency for the inspection and get it done asap once the offer is accepted.

Getting out of an AS-IS Cash purchase?

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