Exit Mechanisms

If you are wholesaling it is vitally important to have an inspection contingency in your contract to use as an exit mechanism in case you cannot find any investors to take your wholesale deal.

The inspection contingency is the exit mechanism that we prefer to use because it is the mechanism that is least likely to be objected to by Sellers. We want to limit ourselves to one contingency or exit mechanism in any contract in order to keep our offers simple and attractive to Sellers. Sellers who see an all cash offer with only an inspection contingency are more likely to seriously consider the offer versus an offer with financing and multiple other contingencies at a similar purchase price.

Use your own verbiage and not the standard language which might obligate you to have an official home inspection which would be an added cost to your deal which is most likely not necessary. If the official language is vague enough and protects you without obligating you to have a professional home inspection it is ok to use it. Your clause should be placed in the body of the purchase contract if a spot is available to add a clause if not put it into an addendum.

Here are a few sample clauses: “This offer is contingent upon approval and/or inspection of the property by buyer and/or buyers partners within 14 business days of acceptance.” or “This offer is subject to a home inspection by a contractor of buyer’s choice, the results of which must meet buyer’s approval.”

If none of your investors take your deal you need to use the inspection contingency to rescind your offer before your earnest money deposit (EM) becomes non-refundable. We don't ever want to lose our EM, be careful.

We recommend that you try to get a 15 day inspection period included in your contract but in some markets that are highly competitive you may need to shorten that time period to have your offers remain competitive.

Good luck.