With each class I teach, I find most students have concerns about the contracts: writing them, signing them, deciding if they should be hand written or computer generated? Can they get out of them? What about earnest money deposits? Each time I teach contracts to the class the same “what ifs” come out.
In my opinion, the contract is the easiest part of the real estate offering/buying step. I want to put my offer in writing and once the seller accepts it (signs and dates), I lock up the property. This simple acceptance of the contract gives me, the buyer, control of the deal. Now I get to figure out what I have put under contract, and what I will be working with. In the contracts that I write, I have given myself the ability to complete my inspections over a specified period of time and if the property does not meet my requirements, I can back out of the contract.
Perhaps what is so terrifying to new investors is the seller saying yes to the offer and what to do next? Especially if you have never purchased a property and just had an offer accepted. Every class you attend, it’s likely your trainer is pulling out a contract to go over in class. So which one do you use?
I suggest you use a contract you understand yourself. This will give you great confidence with the seller. Think about it. If the seller asks you about any part of the contract they do not understand, it is your job to explain it to them. If you can’t explain it, you’re probably going to lose rapport with the seller.
I like an easy one or two page contract that my attorney has reviewed. You do need your attorney to review your contract and yes, there will be a fee for that. But don’t step over dollars to pick up pennies. The few hundred dollars it will cost you for an attorney review can save you thousands if you ever end up in court over a disagreement between both parties.
To be legally binding, contracts don’t have to be overly complicated, confusing, or a multi-page document, but it must be in writing. There are no verbal acceptances or handshakes in real estate.
Based on my years of experience, as a former Realtor and now real estate investor, my favorite contracts are short, simple, and easy to understand for both parties.
Rich Dad Education Elite Trainer