Need More Exit Strategies with My Offers!

Hopefully this will help, a real quick one that comes to mind is on page 167 of Dean's new book. It says, "You need to put an exit clause in the contract, such as "contingent upon bank financing," or simply put an expiration date on it that says if you don't close by a certain date, the contract is void, giving yourself plenty of time to make the deal happen."

You can also google 'real estate contingencies'.

I hope this helps.

Yes, Good Answer Michael. Thats what I would use, "Subject to Buyer Obtaining Suitable Financing". This Contingency is a Reputable one, Rather than using "Partners Approval", The Agents Right, This Contingency is known as a "Weasel Clause" and will be Rejected MOST times, SULLY

Sully, I was going to originally use "subject to lender approval", but the agent said "I don't get it. You're offering cash with private money. Why do you need subject to lender approval?" So, that's how I ended up doing the inspection clause. If I used your clause "Subject to Buyer Obtaining Suitable Financing". Isn't that the same clause as mine, just worded differently? I think I need a different clause since my offers are based on the premise of all cash (private money).

This offer is subject to buyer’s walk-through inspection and/or buyer’s partners’ walk-through inspection and acceptance of same delivered to seller within thirty days of seller’s acceptance of this offer to purchase.

2. This offer is subject to property inspection by a licensed home inspector, the results of which must meet buyer’s satisfaction.

3. Buyer has the unqualified right to assign his interest in this contract prior to settlement to any person, corporation or entity which he may designate.

4.This offer is subject to approval of buyer’s associate within thirty days of acceptance.

5. Buyer reserves the right to show the property prior to settlement for the purpose of either renting or reselling it, and seller agrees to permit access to buyer at any time from the date of this agreement up to the settlement date.

After reading your comments I thought I would jump in.

I fully understand what Kimberly is saying because I have the same question. If I am using a proof of cash letter from my HML, the lender/seller may ask why I have a contingency that talks about me obtaining financing if I already have proof of cash. The whole purpose of the proof of cash letter is to induce the lender/seller to allow me to lock up the prop in the 1st place and they are more motivated becuase I have cash, correct? Why would this be a contingency that they would agree to?

Jason, as far as your contingencies 3 and 4, I am finding these to be difficult to use (not impossible) when dealing with the banks on REOs and pre-foreclosures, etc. I expect this to loosen up over time. I can understand using these contingencies when a bank is NOT involved.

Also, when you use "subject to inspection" which has to meet buyer's inspection. What if the inspection comes in with a clean bill of health and becuase I wasn't able to find my end buyer (as Kimberly says in 17 days since I live in CA as well), what can I say to the bank that would get me out of the contract without repercussions? Wouldn't the bank/seller come back and say why are you breaking the contract if the inspectiuon is good?

Not trying to be negative, just want to understand this better becuase these are the very same issues my realtor and I are trying to hammer out.

Would appreciate your feedback.

Thx,

Neil

This is what I put in my contracts as an added bail out clause. You may want your RE attorney to reword it to suit them.........I call it my Attorney Review Contingency or Addendum:

ATTORNEY REVIEW:
The terms of this contract (and all riders attached) except purchase price, are subject to modification by the buyers attorney within ___ business days following the date of acceptance. Notice of modification shall be in writing (fax acceptable) and shall state the specific terms being modified along with suggested revisions. If within ______ business days of the date of acceptance, agreement is not reached, this contract shall be null and void and all earnest money shall be refunded to the buyer/s.

This contingency provides protection for you. It gives you the assurance and peace of mind that you can negotiate and sign a contract with the ability to get out of it (within the time period specified). But then the sellers have an equal ability to get out of the contract through their attorney–should they choose to do so.

To easily get out of a contract. You can insist on added contract stipulations that are outrageous. Including demanding such things as, putting the closing out for two years, etc. Since the seller will not agree to new ridiculous demands, the contract is voided within the review period.

This is an interesting clause. In effect, it is a general clause that puts the contract in a "review" period for x # of days. Say the # of days I have to close is 30, you are saying that if it is getting close to the wire and can't find an end buyer, then I can create a "ridiculous" modification knowing the seller will not accept it. I'm kinda on the fence with this. In your example above, it almost sounds like you can make "any" modification to get out of this contract.

It sounds to easy.......but I suppose that if the buyer and seller sign it, then I can use to as an exit strategy. I will run this by my realtor's atty and 1 that I know and see what they think of this contingency clause.

Thanks guys for all of your input. Everyone is always so helpful in these threads......you guys rock!

Neil

Neil,

You could not have reiterated my concerns any better. That is exactly what I am trying to avoid using an HML proof of funds letter saying that I am paying with CASH and then the agent and/or bank questioning why it is contigent on financing approval. Next offer, I am going to be more aggressive and say that my partner must have at least 30 days to review and inspect.

We are on the same page. As many people say in these threads, JUST ASK! If the seller/bank is MOTIVATED enough they will agree with these escape clauses (and alot more).

If they don't, I just walk. There are hundreds of more deals (if not thousands) out their that are ripe for the picking. Remember, WE are in CONTROL (regardless of what my realtor or bank/seller may think, not the other way around). We treat them with the upmost professionalism and tact, but a motivated seller needs us MORE then we need them in order to alleviate them of this stressful situation. Yes, we are investing in these properties to make money, but we are the good guys by helping an owner that is in default (the banks have no emotion at all...they aren't the ones being kicked to the curb....but still have to unload these props).

This is the mindset I constantly convey to my realtor, offer, offer, offer at low, low, low prices! And it took me time to find a good one. Every time I have a question regarding a purchase agmt (because the banks in many cases want to use their own boilerplate) we run it by her atty (for instance, I would like to set up a land trust and trying to better understand since I read that this may be a great way to purchase properties and re-sell them to my end buyer without getting hassled by banks). Will know more shortly.

I have been around this forum for less than 2 months and am still learning, but the one thing I know (and it is more of a life lesson), if you don't ask, then you will never know the answer. This is true of EVERYTHING we do in our daily lives!

Much success to everyone!

Neil

Another excellent thread! This is the meat and potato's I need to dive into more as I look around for deals.
Kimmy, I hope everything works out for you on this deal, besides being firm and calling the shots whenever possible I always ask lots of questions to learn as much about a certain deal as needed to avoid getting cornered by anything.
A good solid clause can usually save the day.

how are these contingencies included in the purchase agreement? Is it easier to have you RE lawyer handle this?

You can just list them as you want

in my e-mail "offers" i just put this

1 contingent upon __________

1 contingent upon __________

This may not help too much but if you want to try it you can. If you don't even want to put down earnest money in case you can't find a buyer you will put this: Earnest money of ____ will be paid within 21 days. If earnest money is not paid within the allotted amount of time then contract is null and void.

That way you don't have to put any money down and it still gives you 3 weeks to find a buyer.

bring up