P&S agreement: Am I signing my life away?

Question

How do I know if a P&S agreement is legitimate? I'm about to sign one from a wholesaler. It transfers the rights from him to me.

Is there anything missing from it that should be there for my protection?

Is there anything in it that could harm me?

Let me know if you're willing to take a look!

For example the inspection contingency just says "contingent upon inspection." That seems a little too vague.

Charlie MacPherson · Answer

@Amil D. Reviewing your contract for you would technically be practicing law, and I'm not a lawyer, so no.  That's something they pound into our heads at real estate school.

You can probably get an attorney to review it for a few hundred bucks, and that's money well spent.

BTW - whatever the "wholesaler says" is meaningless unless it's in writing.

I'm worried that you signed the contract without legal oversight.  It seems pretty likely that the contract doesn't have all of the clauses you need to protect your interest, especially if it's written by the opposing party, i.e., the wholesaler.

If it were me, I'd back out of the contract and re-sign if your attorney reviews, edits and approves.

Charlie MacPherson · Answer

@Amil D. There's so much that can go wrong here...

How do you know that the person he says is the seller actually owns the property?
Are there others who have an ownership claim, like relatives or a former spouse?
Have you run title? Are there any clouds?
Do you know what liens are on the property?
Does the wholesaler have a legitimate contract with the seller? And is it assignable?
Is wholesaling even legal in your state? (don't forget that contracts formed for an illegal purpose are void!)

If you can be satisfied with all the answers, I would strongly suggest that you get a real estate attorney to represent you and that you don't pay the wholesaler a dime until closing.

Lien Vuong · Answer

Consult with your real estate attorney. A Purchase and Sale Agreement is legally binding and you're at risk to purchase the home if anything were to happen. It lays out all your contingencies and stipulations. It does not sound like you have a solid idea of what is in the PSA so at the risk for saving $750 fee for an attorney to review it, I think it's worthwhile in the long run. Please consider that a lot of wholesalers are inexperienced and usually have not solicited legal counsel to even review the PSA in the first place, I think it's imperative that you protect yourself no matter what.

Kurt Michaelson · Answer

@Amil D. Indiana should have a specific P&SA that is used for residential real estate. I concur with the suggestions made by others too. Have the document reviewed by a legal professional. If you're unsure about signing an assignment contract with the wholesaler because of the P&SA and you're unsure of its legitimacy for you, I wouldn't move forward.

As @Charlie MacPherson said, unless it's in writing whatever the wholesaler says is meaningless.

Amil D. · Answer

Thanks Davido, I'll message it to you!

Davido Davido · Answer

@Wayne Brooks, Yes, it is not standard practice to notarize a Purchase and Sale Agreement, mostly because Purchase Agreements are seldom recorded with the county.  However, a signature can be notarized on any document.  In this instance "verify(ing) the person who signed it", is precisely what I would be trying to accomplish.  Verifying the signer also appears to be a concern for investors like @Charlie MacPherson, who wrote, "How do you know that the person he says is the seller actually owns the property?"  It is easy enough to verify who the owner of record is, but how does Amil know that the person who signed the Purchase and Sale Agreement in the name of the owner, was the owner.Amil's lead Question was, "How do I know if a P&S agreement is legitimate.  It's legitimate if it is within the law, and the true owner of the property signed it of his/her own free will (not coerced).  Of course talking directly to the property owner could be a fine way to verify that he/she freely signed the Purchase and Sale agreement. When it is not possible to talk to the legal owner of the property, a notarized Purchase and Sale agreement will verify that the person claiming to be the owner of record, at least presented identification documents at the time of signing.

Thanks for your input. Always appreciated.

@Amil D., You could certainly post a scan or photo(s) of the Purchase and Sale agreement that is being assigned to you.  You'd want to black out certain personally identifying details like the property owner and the assignor's names and maybe the address of the property.   By posting the agreement you could get answers to questions like, "Is there anything missing from it that should be there for my protection?" and, "Is there anything in it that could harm me?"

Wayne Brooks · Answer

@Davido Davido Purchase contracts don’t get notarized, never seen one that was.  All it would do is verify the person who signed it.

Amil D. · Answer

@Charlie MacPherson The wholesaler says I can back out within 10 days if I find any unexpected issues per the inspection contingency. I have not paid anything to the wholesaler yet nor has the wholesaler asked for payment.  The agreement that I signed states that I would pay though.

Is it too much trouble for you to check out the agreement and see if there are any red flags? I could send it to you. I will have an attorney review it also if you still think its necessary.

Davido Davido · Answer

I'd look for an agreement that was notarized, and I would verify the notary's commission was active and then call the notary to verify that he/she remembers notarizing the agreement and remembers verifying the identity of the signer.

P&S agreement: Am I signing my life away?

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