purchase agreement contingencies

17 Replies

What types of contingencies do you guys put in your purchase agreement? Do you need them? Anyone have a purchase agreement they could share? Thanks!

In the beginning of my investing career I'd put two contingencies:  

(1) Subject to partners approval

(2) Subject to approval of inspection

These days I don't put any contingencies.  A lot has to do with experience.  However, if I were starting out I still wouldn't use contingencies.  I rarely put up any money.  The few times that I do it's usually $10.  If I have to I can afford to lose that.  

P.M. me if you want to look at the purchase agreement that I use.  It's nothing special.  But it gets the job done.

I put a 7 day inspection period. I don't use "weasel clauses" such as "subject to my partners approval", etc because that is just plain BS. I don't enter into contracts unless I intend to close. You will find lots of FRAUDS AND SCAMMERS that sign all the time with no intention of closing. You can find lots of them on BP willing to teach others to lie and deceive. I doubt most of them make it far in the business.

I don't put any contingencies in my offers.  I know some wholesaler's like to do it but these are typically the people who have no means to close and they are looking to skirt the seller if they can't pass the deal.  Your realtor should be able to give and fill out a standard purchase agreement for you.  You don't need a standard PA to close on a property but if you plan to use a title company they will need most of the information.

@Roland Paicely Not that I would ever allow it, but If some knucklehead put up a $10 EMD on one of my properties and then defaulted I wouldn't bother forfeiting the deposit. I would resell and if necessary pursue him for a deficiency.

Foregoing contingencies because you think your max liability is your EMD? Not smart. Putting a provision in your PSA limiting your liability to the EMD and only putting down $10? I can't believe you actually get away with that.

@Tim Gimer obviously we run our business different.  No need to attack someone though.  

Also, I'd rather lose only a $10 EMD vs thousands. Which you must prefer.

@Roland Paicely I was expecting you to defend your position, not claim I attacked you. When I believe someone is giving questionable advice I will point that out, and why. Best of luck to you.

Typical wholesaler EMD is $0 from what I am hearing in my area. That is until they find a buyer and want a deposit, then it is usually thousands, and nonrefundable.

Subject to me changing my mind because I can’t find a buyer

Subject to everything working out the way I plan it on my end

Lol jk

Only contingency I ever put is sub to a interior inspection because I send all my offers before I ever visit a property

@Tom Gimer, I suppose the part that felt like a personal attack was referencing me as a 'knucklehead' for putting up $10 EMD. Maybe I took it the wrong way. I done that many times and the sellers never have a problem with it. I do what I say in the contract. We close and everyone is happy. I don't understand how that is questionable advice!

At any rate, you are obviously successful doing it your way.  I'm happy for you and good luck in the future!

@Roland Paicely Not a personal attack just a hypothetical.

Buyers typically want contingencies and low EMDs. Sellers prefer no contingencies and high EMDs. Yours was an odd combo. And I was just pointing out that if anybody else followed that strategy and defaulted they could lose more than just their EMD.

Big difference between you and many wholesalers on BP: you close

When your exit is an assignment you need contingencies.

@Tom Gimer....................You are 100% correct.  

Thanks for your replies everyone. I wasn't getting notifications that anyone had commented on my thread and hadn't checked up on it in a while.

@Roland Paicely Thanks for your comment! I was trying to do the same thing, but had ran into multiple sellers that wanted more. The problem is without a contingency, which I needed anyway, I didn't want to lose a $500 emd.

@Tom Gimer That's solid advice as well. I didn't know someone could come after me for having weasel clauses in my contract and only $10 emd. I've already changed my contract to escrow $500 emd, but still have weasel clauses as a way out.

@Brian Pulaski I don't know about your state, but in Minnesota it's in our best interests to not put $0 emd. Could make the contract void.

I spoke with some people and will probably put some weasel clauses in my contract. I'm still new to this and don't know pricing as well as I could. I know it will come with time. The problem is not every seller is motivated and may not be willing to come down in price as much as I'd like. I don't want to get unknowingly stuck with a PA I can't afford to pay. I would like to be able to come back and cancel the contract/renegotiate a lower price if I can't find a buyer willing to pay the PA price. I know that's not the best strategy but you gotta learn somehow. 

We always recommend *Inspection, you never know about foundations, sewer lines,or roofs, etc.
*Due diligence 4+ units
*Common interest Communities addendum for HOA units
Sometimes it is appropriate for eviction/vacant prior to closing.
We always write-in deposits and prorated rent transfer at closing clause.
Every situation is different and requires different approaches and protections.
Many agents already know us and our reputation for not wasting time with offers we do not intend to close on.

@John Thedford................FYI, a 7 day inspection period is as much of a weasel clause as subject to my partners approval.

Originally posted by @Roland Paicely :

@John Thedford................FYI, a 7 day inspection period is as much of a weasel clause as subject to my partners approval.

 NOT if it is a valid concern. Just closed on #13 and had NO inspection or financing clauses. It all boils down to intent, and whether the clauses are there to commit a FRAUD upon the seller. Signing contracts with NO intention of closing is called FRAUD IN THE INDUCEMENT which seems to be heavily promoted by some BP members. FRAUD AND SCAMMERS using "subject to my partners approval" when, in fact they don't even have a partner, is obviously FRAUD. 

@John Thedford..........good for you.  Closed on #13.  Of course, if your intent is to wholesale and you're using 'subject to inspection' as a weasel clause when your intent is simply to wholesale.   That can be constued as FRAUD.  FRAUD AND SCAMMERS using "subject to inspection" when, in fact they don't intend to have an inspection is obviously FRAUD.

I do use an Inspection Clause but that's because I contract to buy many properties site unseen, based on the owners word and photos, and after contracting we set up a time for my GC to fully inspect the property and bid it to make sure there's nothing major the homeowner didn't disclose.  But I let them know up front, that the contracted offer is pending no other major repair that wasn't disclosed. 

I also use this in all my purchase agreements now:

"Buyer reserves the right to do a final "walk through" the day of closing. Property is to be vacated by all occupants not on a current lease. Seller agrees to pay any legal fees and expenses required to remove occupants if property is not vacated on day of closing." 

I added that after having an issue getting a family member of a previous owner to move out after closing on a property.

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