Seller wants to remove my escape clause

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Seller wants to remove my escape clause

Mark MarinaccioPro Member
Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes

I have a seller that wants me to remove the language from the purchase offer that would allow me to back out of the deal but I'm hesitant to do it for obvious reasons.

Anyone have any creative ways to help protect myself if I remove that language, for instance can I add a line that lets me reduce the purchase offer by any amount I want should my inspection produce unfavorable results?

This is in Tennessee. 

thanks!

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Jerry PuckettPro Member
Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
10y
Originally posted by @Mark Marinaccio:

I have a seller that wants me to remove the language from the purchase offer that would allow me to back out of the deal but I'm hesitant to do it for obvious reasons.

Anyone have any creative ways to help protect myself if I remove that language, for instance can I add a line that lets me reduce the purchase offer by any amount I want should my inspection produce unfavorable results?

This is in Tennessee. 

thanks!

What might that obvious reason be? Not having the money to close? Not having any intention of closing? No value judgement here, I'm genuinely curious.

I read your inspection clause, and it sounds here like you are wanting to simply trade one weasely clause for another. Why not just a standard inspection clause?

Have to agree with Ryan here...just be honest. What do you have to lose? Protect yourself from what? You made the offer..... The best way to protect yourself is by doing your due diligence. 

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  • Colleen F.Pro Member
    Investor · Narragansett, RI · Member since 2013 · 8k+ posts · 4k+ votes
    10y

    The clause that says subject to inspection in x days?    I would be inclined to say that I will shorten but not remove. If he has concerns he can keep marketing the property.

    1Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    10y

    Unless you have put down a very large good faith deposit (and even then), the buyers obligation to the contract is really hard to enforce. No body can eventually force you to buy something you dont want. Now they could make a claim to the deposit, but even then they would have to show actual damages. And escrow cannot release the deposit to them without both parties agreeing or some kind of court order. So most sellers cannot get the deposit either. Now the seller on the other hand is really on the hook. If the buyer performs, seller cannot easily back out of the contract and in fact a judge can force you to sell something even if you change your mind. Seems unfair, but thats how it is. Thats why I dont like wholesalers who tie up buyers property but really have no commitment from their side.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    @Mark Marinacciodo you intend to buy the property or is your escape clause a ruse to back out if you cannot assign it?

    1Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    Hey @John Thedford it depends on the state of the property. Considering the area it's in I'm not yet sure if it's worth rehabbing, holding or wholesaling but my guess is that I'll wholesale it.

    0Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    10y
    Originally posted by @Mark Marinaccio:

    Hey @John Thedford it depends on the state of the property. Considering the area it's in I'm not yet sure if it's worth rehabbing, holding or wholesaling but my guess is that I'll wholesale it.

     If you have "partner approval" remove that crap. Just use the standard X amount of day inspection period. 

    If upon actually viewing the place you determine that the deal is blown just let the seller know. I typically give them the option to cancel or lower the price.

    2Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    @Ryan Dossey I have standard inspection language and then "for any reason whatsoever" - see below:

    8. INSPECTION PERIOD. Buyer’s obligations to close this transaction are subject to the satisfaction of the following conditions: (a) Buyer is satisfied with the status of title to the Property as disclosed by the title commitment provided to Buyer; and (b) Buyer is satisfied with Buyer’s investigations and inspections of the Property and with the results of Buyer’s physical inspection of the Property, including all electrical, plumbing, mechanical, heating and air conditioning equipment and all furnishings, furniture, equipment, appliances and personal property to be conveyed to Buyer. In that regard, Buyer shall have until the business day before COE (the “Inspection Period”), during which time Buyer will have the absolute right to cancel this Contract for any reason whatsoever, in Buyer’s sole and absolute discretion. Upon such cancellation, Buyer shall be entitled to a return of all earnest money deposits together with all interest earned thereon. Unless Buyer gives written notice of cancellation before the expiration of the Inspection Period, then Buyer will be deemed to have elected not to cancel this Contract. Seller grants Buyer and Buyer’s inspectors, employees and agents reasonable access to conduct walkthroughs of the Property for the purpose of conducting any inspections of the Property Buyer may require. 

    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    10y

    "satisfaction"   that term is so vague .   As a buyer , that is a great clause . As a seller I would do the same  thing strike it out .   

    0Reply
  • Jerry PuckettPro Member
    Wholesaler · Fort Worth, TX · Member since 2010 · 1k+ posts · 1k+ votes
    10y
    Originally posted by @Mark Marinaccio:

    I have a seller that wants me to remove the language from the purchase offer that would allow me to back out of the deal but I'm hesitant to do it for obvious reasons.

    Anyone have any creative ways to help protect myself if I remove that language, for instance can I add a line that lets me reduce the purchase offer by any amount I want should my inspection produce unfavorable results?

    This is in Tennessee. 

    thanks!

    What might that obvious reason be? Not having the money to close? Not having any intention of closing? No value judgement here, I'm genuinely curious.

    I read your inspection clause, and it sounds here like you are wanting to simply trade one weasely clause for another. Why not just a standard inspection clause?

    Have to agree with Ryan here...just be honest. What do you have to lose? Protect yourself from what? You made the offer..... The best way to protect yourself is by doing your due diligence. 

    3Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    @Jerry Puckett, I'm using what appeared to be the best, most comprehensive purchase agreement that I could find so I'm not sure how it differs from a standard one, this is my fist go round at this. 

    I'm not trying to "weasel" out of anything, but I don't know of anyone who buys real estate without an inspection that allows them to back our or adjust price if they suddenly find it's in need of repairs, updating or improvements. 

    I think the seller is cautious and doesn't want her time wasted which I can respect, but I also don't want to put myself in a position to lose money so I'm asking if anyone, with more experience than I,  has advice on how to approach this. 

    thanks!

    0Reply
  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    10y

    @Mark Marinaccio, the Seller has every right to ask you to remove this sentence: "Buyer shall have until the business day before COE (the “Inspection Period”), during which time Buyer will have the absolute right to cancel this Contract for any reason whatsoever, in Buyer’s sole and absolute discretion".

    Can you see that the sentence has nothing whatever to do with your due diligence, but everything to do with your chickening-out ability?

    Not sure about the use of your "furnishings, furniture" terminology, either...

    But on the other hand, your due diligence period SHOULD give you until the close of business ON the COE day, not the day before? Cheers...

    0Reply
  • Stephanie Dupuis
    Residential Real Estate Broker · Bremerton, WA · Member since 2013 · 494 posts · 142 votes
    10y

    With the exception of:

    "Buyer shall have until the business day before COE (the “Inspection Period”), during which time Buyer will have the absolute right to cancel this Contract for any reason whatsoever, in Buyer’s sole and absolute discretion" this looks like a fairly standard inspection clause. Typically, this is enough to get you out of contract if you find something unsatisfactory with the property during inspection. 

    Does your contract explain the process for responding to the inspection? This is often to referred to as "Inspection Response", and is where most PSAs (Purchase and Sale Agreements) outline the procedure and timelines for responding to issues discovered during inspection (such as buyer requesting a lower price, etc.).

    0Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    Hi @Stephanie Dupuis I do not see the Inspection Response in my PSA. Thanks for pointing that out though!

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    I don't get it. A typical contact provides for x days inspection period. That is usually a blank, and then filled in by the purchaser. Seller can then accept the contract, counter offer on the inspection period, or decline to accept. What are you trying to do? Tie the property up and hope to sell the contract...or PURCHASE it? There IS a difference. If you are leading the homeowner to believe you intend to purchase it, but are truly hoping to assign the contract or walk away, that would be another example of the problem with "wholesalers". Do it right, do it honestly, and build a good reputation. Do otherwise, and don't count on referrals! Personally, I would NEVER let any fraudster wholesaler tie up my property. On the other hand, IF you intend to purchase, would you need 30 days for an inspection? 15 days? A good inspector can do it in one day. So, I am still curious: is the "inspection period" a ruse...or a legitimate due diligence on your part to consummate the deal or walk? Personally, I typically use 5 days for the inspection period. That allows time for the inspector of my choice to schedule, come do the inspection, and provide the report. At that time, I can tell the seller we have a deal, or tell them thank you and that I am no longer interested. The frauds using 30 and 60 day inspections are just that: frauds!

    3Reply
  • Dana WhickerPro Member
    Investor · Fernandina Beach, FL · Member since 2014 · 557 posts · 374 votes
    10y

    No offense OP I appreciate what you're doing but if someone submitted an offer for one of my properties that included that "for any reason whatsoever" nonsense I wouldn't even respond.

    2Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    @John Thedford I thank you for you perspective but the seller doesn't want any clause that allows a cancellation of the deal. I've represented to her all the potential options of how I might proceed, including wholesaling, and since she hasn't been able to sell it for months and months I'm willing to see what I can do for her, which may include assigning it someone who has a better ability to fix it up and rent it out than I do. 

    From all the responses it seems as though no one removes inspection clauses from PSA's

    1Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    @Dana Whicker , I'm feeling like that's the crux of the issue - that line which seems unnecessary anyway and should be removed from my contracts as I really don't need it. 

    1Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    @Mark Marinaccioif you provide her with a typical state approved contract they typically have an inspection period. You can write an "as is" contract with right to inspect. I find it hard to believe a seller won't allow an inspection period. Even the most hard nosed seller would certainly agree to a 3-5 day inspection period? How long are you asking for? A legitimate inspection period or a bulloney assign the contract inspection period? If you are asking for 30 days..or even longer...my guess would be she has figured out your true intent and won't be taken advantage of in that manner.

    2Reply
  • Mark MarinaccioPro Member
    OP
    Flipper/Rehabber · Agoura Hills, CA · Member since 2014 · 96 posts · 25 votes
    10y

    @John Thedford I asked for 15 day inspection, 17 days to close - so only 2 days more than inspection period.

    0Reply
  • John Thedford
    Real Estate Broker · Naples, FL · Member since 2013 · 9k+ posts · 6k+ votes
    10y

    @Mark Marinacciohave you considered writing it on a state approved contract? You can use that as a selling point. If you do, it won't contain all the useless bulloney stips you mentioned above. It will offer an inspection period, a right to terminate, etc and may not scare her away.

    1Reply
  • Polar Prutaseranee
    Flipper/Rehabber · Tustin, CA · Member since 2015 · 433 posts · 103 votes
    10y

    I haven't read all the comments due to time constraints, but if you take away your escape clause, maybe it's not the right deal. It's like going to an auction and having a max bid in mind, but when people start outbidding you, you end up going higher and higher until your profit margin gets pretty narrow. 

    0Reply
  • Matthew Paul
    Severna Park, MD · Member since 2013 · 7k+ posts · 7k+ votes
    10y

    Sounds to me that the seller has been down this road before and isnt a push over .

    0Reply
  • Tom Shepard
    Investor · Brentwood, TN · Member since 2015 · 140 posts · 39 votes
    10y

    I would definitely remove the "for any reason whatsoever" part of it, but if they insist that the whole inspection clause can't be in there I would tell them to find another buyer.  Not worth it to take that chance.  IMO.  Of course, I nearly got burned on an auction property that did not end up happening...as they don't generally allow inspections.

    1Reply
  • Ryan Dossey
    Real Estate Broker · Indianapolis, IN · Member since 2014 · 3k+ posts · 2k+ votes
    10y

    Here's the thing.... Your contract should be so straight forward that they have nothing to "strike out". Your 1 paragraph inspection comes off as if you have no intent to close. What type of EMD did you do?

    0Reply
  • Jay HinrichsBusiness Member
    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
    10y

    @Ryan Dossey  Ryan hit the nail on the head most sellers are not sophisticated.. they look at that long winded inspection clause and think legal ease and they get their backs bowed up.

    If you simply have a Due diligence that is one sentence.. your not buying some complicated multi million dollar property here your buying some low end SFR..

    Your Em is probably very small as well.. your just way over thinking this given the size an d scope of the transaction..

    Most state standard PSA will have 10 business days as a default for DD... that gives you two weeks...

    But if your smoking a deal... I would have that cut down to 1 to 2 days... then close in 5 if you really want to buy the thing... If your ulterior motive is to really just assign or sell then this may not be the right seller.

    The 30 day DD and then close day 31 is one of the things the STate of OHIO really has heart burn about in the unlicensed activity that they are going after IE going after wholesalers that really have no intention to close themselves.

    use the Kiss program.. keep it simple stupid...

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    2Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    10y

    Pretty standard I'd say, if the seller has heart burn, take out this:

    "during which time Buyer will have the absolute right to cancel this Contract for any reason whatsoever, in Buyer’s sole and absolute discretion."

    It doesn't change anything as inspections must be satisfactory. 

    Satisfactory generally means something that has a significant cost to it.

    Never use "partner approval"guru junk unless you really have a true business partner and even then, it is no exit guarantee. Partners contracting have assumed authority to act on behalf of a partnership. Imaginary partners is just guru junk. 

    If a seller wants the due diligence, something is probably wrong. Tell them to open up for all inspections before contracting or I'd walk. And yes, address the recourse if things are found unsatisfactory. 

    You don't need weasel clauses, you do need the right to inspect and avoid the obligation if things are not satisfactory. Only exception is with foreclosures, auctions or bank owned inventory, if it's an individual, inspect it! :) 

    2Reply
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