Posted 4 months ago

Test your skills of contract clauses - selecting the words that win.

For over 40 years now in the field of investing - I've found that it is important to understand the words you put in a contract offer. Here are a few questions about clauses you should be aware of when making offers. Glad to send you my answers to these questions - answers that I am sure will help  you.....good luck. 

Contract Clauses Quiz

What you say, how you say it and what you want to accomplish is important - say what you want in your contract offer to get what you want and what will benefit you.

Clauses are designed to tell a story about what you want from to accomplish when writing an offer on real estate.

Use your own words (no need to use legalese) when writing clauses.

1. The seller wants $100,000 - you feel you can make money by getting it for less - your target is about $85,000. You want this deal and want to get the offer signed now while you are with the seller. Your objective is to have a public assignment auction. This is a perfect "Hybrid" situation. Remember a hybrid is where you make an offer that will net the seller more than your offer.

Write a clause in your own words would you put in the contract of sale.

2. You found a building that looks profitable - but you know it will take time to assign it to someone else in order to make a great profit - but you need time.

Write four ways (clauses - in your own words) to control this property for long enough to flip it. Hint - settlement time - extension clauses - and another delaying tactics.

3. You got a lead on this houses - you like it. You know you can get 80% from the bank --- but you are short of cash - write three clauses that would provide you with the 20% deposit. Write in your own words - remember you are putting this in a contract offer, this offer may be seen by the title company, seller's lawyer a lender or a  judge.

4. You are meeting with the owner who wants $125,000 - you want it at $100,000 - there are three other flippers who have an appointment to talk to the seller who happens to be elderly - he is moving into an assisted living home. Your objective now is to control it so that those other flippers will go away.

He will accept $115,000 (but to make a profit you need to get it lower) What will you offer and how will you renegotiate after the contract is signed and how will you do that? This tactic is call "second stage negotiation". Explain how you would accomplish this.

5. You want this property you looked at --- but you don't want to use any of your money - The asking price $100,000.

Write a clause in the contract that will enable you to do that. (int: One of the tactics is called "mortgage out". another method has to do with "equity paper", there are several other ways to accomplish this)

What other alternative ways are you able to get the property without using any of your own money?

6. You just sold a property for a nice profit -- you will have a tax penalty of $40,000 - you want to avoid the tax and are making an offer on another property - what clause will you put in the offer for the new property that will help you avoid the tax.

Write the clause in your own words.

7. You have no money - but because your wife if a great manger of your portfolio - you see that you have 5 properties that have nice equity.

Write in your own words how you will be able to make offers on properties using you dead equity.

9. You are making offers on properties and you are very tight and you would like the seller to give you money -- write the clause that will enable you to walk from settlement with cash.

10. The house you want needs repairs -- write a clause that will be equal to a "repair partnership" that will keep the you and the seller close the deal.

11. You found a 30 unit apartment house -- the seller is super motivated and wants out because he is a poor manager and is open to your creative offers - write a clause that will make the seller happy and keep you from putting up much of your own money for the down payment. (Hint: Unit assignment)

Comments (1)

  1. this is a great article, my mind is on fire trying to figure out the answers to these. New to real estate and investing, thanks for contributing your Free knowledge to the bigger pockets forum.