Best contingencies to get out of the deal

6 Replies

Hi,

In your "typical" purchase and sales agreement for a wholesale deal, is there consensus on the best clause, condition, or contingency used to revoke the offer? Heard from some people that they use a feasibility clause but am wondering if there is anything else that might work better.

Thanks

Just put in a general "Due Diligence" clause that gives you the right to inspect and perform due diligence for a period of X days, and allows you to back out if you're not satisfied with the results of your due diligence for any reason.

Are you planning to tell the seller that you're wholesaling?  Assuming so, they should expect that you'd back out if you can't find a buyer, so this shouldn't be an issue...

Financing will keep you safe enough, if the lender doesn't like it, you're off the hook. Due diligence as to condition, market, value, title and insurability all fall under the financing contingencies. Other areas of you due diligence should be done before you sign a contract. 

The best way to get out of a contract is never get into one, if you don't know what you're doing, don't sign one until you see the light at the end of the tunnel, if that light turns out to be a train, your lender will get you off the track.

Putting in a bunch of sly contingencies weakens the offer, it's easy to get your offer tossed out to file 13 and consider that in dealing with or through Realtors you'll get a quick reputation, you may have the highest bid and you'll still have you offer trashed. I suggest you get out of that mind set as to how to finagle a deal and be prepared to back up what you say you'll do and carry through with the offers you make. :) 

I was not planning on telling the seller that I was looking to wholesale per se, but rather I'd be thinking about either flipping it personally, finding a flipper or some sort of partnership. It would all depend on my capital reserve the time of closing.

"Just put in a general "Due Diligence" clause that gives you the right to inspect and perform due diligence for a period of X days, and allows you to back out if you're not satisfied with the results of your due diligence for any reason."  this is what I had assumed but wanted to clarify and confirm. Many thanks for your answer.

Originally posted by @Patrick Britton:

I was not planning on telling the seller that I was looking to wholesale per se, but rather I'd be thinking about either flipping it personally, finding a flipper or some sort of partnership. It would all depend on my capital reserve the time of closing.

 If you're planning to actually purchase the property, then as Bill suggested, I'd just use a financing contingency.  Paying cash?  A basic inspection contingency should suffice. 

As Bill mentioned, contingencies weaken your offer, so use as few as possible and keep them as specific as possible.

I would also put an right to extend clause.  Whether it is fee or some monetary fee per day, per week, or per month. Some people see it as a penalty but I see it as a way to buy extra days to close if needed.

If you know your numbers and your offer is a good deal (which in this game is a killer deal) .. then there is no reason to have a 'standard contingency' to allow you to back out without losing your deposit.  If there is a septic/well/foundation inspection required that is another story.

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