Brand new real estate investors are always worried about how to fill out a Sales and Purchase Contract even before they find their first investment property. And I will admit, it seems like a big deal until you have done it a few times. But the truth of the matter is that folks tend to make it harder than it really is. It's actually a pretty simple and straightforward process. I have made a short video so that you can see first hand just how easy it is. If you plan to “assign the contract”, I have gone over that too.
How to Fill Out a Sales and Purchase Contract
What Needs to be Included In the contract? A basic sales and purchase contract will state the price you are buying the property for, it will list any conditions or terms you have agreed upon, and it will state during what time frame you will close the deal. Just a word of caution; be sure the dollar amount is correct. Here are some other things that should be included:
- That clear title will be guaranteed
- If the property is being purchased “as is” it needs to state that
- Who will be cleaning out the house (if applicable)
- Permission to put a lock box on the house if it is vacant. This is especially important if you are a wholesaler or rehabber.
- Any special concessions you are paying for such as closing costs
You need to spell out everything in detail; there should never be any assumptions by either party. I usually re-name my master contract as the name of the property and save it in a file I created called “Offers Submitted” on my computer. Some things like when the utilities will be switched into the new owners name can be conveyed verbally.
Special Clauses to Put in Your Contract
Subject to Partner Approval Clause This is a controversial topic when it comes to seasoned investors. They almost always don't like it, since they are going to actually close on the property( or at least they have the ability to close quickly on the property) with cash. This definitely makes them a more desirable buyer for any property. However, since this video is intended for investors just starting out, I want to show you one way to protect yourself. If you are brand new and you intend to assign or double close the deal, one of the biggest fears is, “What do I do if I can't find a buyer”? Having this clause in the contract, alleviates that fear altogether. I would encourage you to take this out as soon as you have financing sources lined up. As I said before, not having contingency clauses in your sales and purchase contract makes you a much more desirable buyer. So, who is your partner? It's your money partner. That could be the bank, a private lender, or your end buyer if you're selling or assigning the property to another investor.
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One Final Tip
If you have your properties in one of the programs or CRM'S available today, doing a search for a particular property will be an easy matter. These types of programs are pretty sophisticated. However, if you're using something like Quickbooks, As you begin to buy more and more properties, how they have been saved in your computer it will become very important. It will become difficult to find a particular address if you have saved them with the “number” part of the address first such as “1234 Main Street”. Be sure to save them as, “Main Street, 1234”. You want them to show up in alphabetical order. If it is a numbered street, save the file as “22nd Street, 2245 etc. By doing this you will be able to find the paperwork for your properties easily. Your list might look something like this:
- 22nd Street, 2245
- 43rd Street, 612
- Arbor St., 892
- Drake Ave., 12209
- Naomi, 4612
I think you can visualize how much easier it will be to find a particular address especially if you have 50-100 properties in your file.
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