Purchase And Sale Agreement Questions

Hello! I will go thru and answer blank-by-blank to the best of my ability. I am sure there will be some that I am unsure of, but I will help whereever possible.

Before I do so I would like to say, I seriously recommend finding a great RE Agent/Realtor to work with. They will be able to help you immensely, especially when the subject is contracts. They will have seen MANY purchase agreements and will be able to fill everything out after receiving information from you.

I will however do my best to answer your questions, hopefully other more knowledgeable individuals will be able to help you where I cannot.

--------------------------------------------------------------------------------------------------

"and Buyer Gerald Daniels [OR SHOULD THIS BE MY COMPANY NAME?]"

Either/or. If you have an LLC you wish to use, then do so. If you intend on purchasing in your name, use your name.

--------------------------------------------------------------------------------------------------

"Cash To Seller At Closing $[PLEASE EXPLAIN]"

Any cash to be payed to seller at closing. IE: down payment

--------------------------------------------------------------------------------------------------

"Existing Loans & Liens $[PLEASE EXPLAIN]"

Any existing loans and/or liens against property accrued by current owner (seller).

--------------------------------------------------------------------------------------------------

New Loan To Seller At Closing $[PLEASE EXPLAIN]

I am unsure of this one. I cannot think of a reason to give the seller a loan. However, I am sure that there is a good reason for this being here, I am just unsure as to what that is. Hopefully someone more knowledgeable then myself can help you here.

--------------------------------------------------------------------------------------------------

Purchase Price you are correct on.

--------------------------------------------------------------------------------------------------

A. Loan to _______________________________________ Balance
$____________________________
Interest rate: _________ %, Monthly Payment $___________________ Loan Number
_____________
Date last payment made ____________________________ Loan current through
_________________
B. Loan to ________________________________________ Balance
$___________________________
Interest rate: _________ %, Monthly Payment $___________________ Loan Number
_____________
Date last payment made ____________________________ Loan current through
_________________
Other liens: __________________________________________________________________

I am not positive about this section. Most of it seems pretty standard and self-explanatory but I am thrown off by a few things. Such as date last payment made. I believe this contract is for purchasing a property "subject-to" the existing loan. Which unfortunately I do not really know anything about. Again, hopefully someone more knowledgeable then myself can help you out there.

--------------------------------------------------------------------------------------------------

paid as follows:
______________________________________________________________________
including interest at the rate of_______%. [PLEASE EXPLAIN THE PAID AS FOLLOWS PART]

This section should be regarding how you will be purchasing the property. IE: Cash, FHA, Conventional, Non-Conventional, etc. Again I am not positive about this either but this is my best guess.

--------------------------------------------------------------------------------------------------

3. PRORATIONS, IMPOUNDS & SECURITY DEPOSITS: Loan interest, property taxes, insurance, and rents shall
be prorated as of the date of closing. All security deposits shall be transferred to buyer at closing. All impound
accounts for taxes and insurance are included in the purchase price and shall be transferred to buyer at closing.
Any shortage in these accounts shall be charged to seller at closing. [PLEASE EXPLAIN THIS SECTION]

I understand this vaguely but not well enough to give you a good explanation. I apologize but I do not want to give you false information.

--------------------------------------------------------------------------------------------------

This contract appears to be a "subject-to" contract for purchasing a rental property, near as I can figure. I really wish I could provide a more helpful response to your questions. I hope the little that I do know, helps you out. Hopefully you will get more input from other more experienced people then myself. Keep up your search for knowledge someone here is bound to know anything you wonder. There are many, very helpful and intelligent individuals here.

Good luck! I hope all goes well and hopefully you will have success stories to share with us soon!
-Mike Hutchins

Mike,

Thanks so much! This helped me a immensely. I am getting closer to where I need to be with this. So, as you said, this seems to be a subject-to contract. That never crossed my mind. So I probably need to find a simple assignment contract or modify this one to be a simple assignment contract. At the same time I need to understand how to do subject-tos as well.

I am working with a RE agent who seems pretty helpful and enthusiastic. I will see how long that lasts when I ask her to submit some low offers on properties for me. I already explained to her that as an investor I make my money by buying properties at wholesale prices.

I am also trying to find a good Houston based real estate lawyer. Someone who can tailor these contracts within the confines of local and state laws and still keep them short (1 to 2 pages), unambiguous and easy to explain.

Again thanks for the help.

Not a problem, glad I could help out. The deal you are working on will be an assignment? If you provide details or ask questions pertaining to your current deal, you will probably get very helpful responses/insight. There is so much knowledge to be gained here.

I wish I could of helped a little bit more. I still need to learn about subject-to and wrap-arounds myself. I am taking 1 piece at a time right now. I've already learned so much in the last few months that I almost can't believe it. Largely thanks to everyone here, the DG Fam is outstanding.

Did you not mention before-hand that you would be making low offers at 30-50% below FMV? I made sure this was 1 of the 1st things I discussed with my Realtor before deciding if we would work together. It is always good to be upfront about everything, if nothing else you will save yourself time and effort.

Do you not want to bring your agent in on the deal you are working on? They should be able to help you with the P&S quickly and painlessly. If it is a simple assignment you need only add "and/or assignee" after your name as buyer. Which you can easily add to a P&S which you request from your agent.

You definitely want to make sure you have a relationship with your agent/Realtor where you are not worried about asking/requesting anything that you may need from them. If this is not your current agent, I strongly suggest finding someone who meets your exact criteria. You want someone who accents and reflects your goals, someone who sees your potential and is willing to work and grow with you!

As far as the RE Lawyer, that is certainly a good idea. I do not have 1 lined up but I wish that I did. I do not need 1 as of yet, but you never know. Absolutely an excellent addition to your team. You want to have as many resources available as possible.

If you need anything else, don't hesitate to ask. If I can't help, stand assured someone here will be able to. Again, good luck to you my friend!
-Mike Hutchins

Yes, it is going to be an assignment deal. I have only been looking at the numbers (i.e. comps and possible offer numbers) and I have not approached he owners explaining my interest yet. I want to make sure I have all this stuff lined up so I am not stuck between a rock and a hard place with some question I can’t answer or can’t get an answer quickly for.

I did, but I think that some people, who have never made offers like that, don’t really realize what that means. So once she makes that first offer and gets yelled at by the agent on the other end of that offer, she may have second thoughts.

Good idea about the contract stuff. She may have something already drawn up for this and I may be able to skip the interaction, in the beginning away, with the pompous a** lawyer.

I think I may have the above in this agent. When I initially talked to her she was positive, enthusiastic and inquisitive about what I was trying to do. Nothing negative ever came out of her mouth. The only two things I worry about are:

1. Putting too much work on her and burning her out.
2. The affect on her of the possible negative responses she may get to the low offers.

LOL! Well, my first outing with a RE lawyer was not the most positive experience. Follow the link below for more on that:

http://www.deangraziosi.com/real-estate-forums/contracts-and-offers/2824...

But I will continue to seek legal council. I want to steer clear of as many legal issues as I can.

Mike Hutchins wrote:

If you need anything else, don't hesitate to ask. If I can't help, stand assured someone here will be able to. Again, good luck to you my friend!
-Mike Hutchins

I will and thanks again for your insight and guidance.

I definitely understand where you are coming from wanting to be prepared. I feel the same way still when I speak with an industry professional who I have not yet spoken with. Especially since I am 23. Maybe if I had some gray hairs they would give me more credibility off hand lol. I have to earn any respect I'm given, which is just fine by me.

But, if you are ever asked a question which you do not know the answer to, just state confidently and politely that you do not know right now, but you will absolutely get that information to them. Or something along the lines.

Whatever the case, you should take action. If you make mistakes, great, now you know what not to do/say next time. Just take everything as a learning experience. It's nerve-wracking but you get used to it. Think about how much fun it will be once you have it all to a science..

As far as your agent, since you where clear about your intentions from the beginning, she probably has a pretty good understanding of what you are going to need from her. Any agent will understand what you mean by making offers at 30-50% below fmv. Just ease into everything.

Don't give her a huge workload right off bat, just get her used to what your doing so you are both used to working together. Once the ball is rolling she will want you to give her more workload because then she will know that your business makes her money.

Regarding the attorney, I saw that posting before this one and commented lol. But you are right, it is always good to CYA. If you find an attorney who sounds like a good addition to your team, you can close your 1st deal without the using them but keep them on the back burner. Once you've gained some capital to play with, you can use that attorney from then on.

I hope that all goes well and you find a good deal in the near future! Keep us updated.
-Mike Hutchins

WOW! I am really shocked to find out you are only 23 years old. You seem very wise beyond your years my friend! You have provided a lot of information and encouragement on all this. If you have not done a deal yet, you should go out and do one as soon as you find a prospect. Just from exchanging posts with you I can tell that you will be successful. You just may lack all the confidence you need because of your age.

Something very beneficial about starting this while you are young is that you have your whole life ahead of you to enjoy your future success.

Sadly, I am 39 and have procrastinated away most of those previous years at jobs I did not like, but because I was not getting paid badly I just toughed it out. Well I am tired of toughing it out, dealing with people that I don't like and I recently got a new director and VP at my current place of employment and they have been driving me batty. So I decided that I am going to do something now so I can plan to be out of there within the next 2 to 3 years. I always told myself when I leave there that I am not going to work for anyone else but myself. But i did not have the vehicle to make that happen. Now I have a vehicle, real estate, and a semi-fragmented road map, DG family. I just need to fill in the missing fragments of that road map. Which is what I am doing right now.

Haha thank you, I do consider myself a little wiser then most people I know my age. I have been thru and seen quite a bit in those years, I guess it has an impact.

As far as my 1st deal I have been working to get all the pieces placed together for the past 2 months or so. I have my buyers lined up with a property which they absolutely love, and I have the property under contract currently. I am waiting to get the buyers in contract and be discharged from my current P&S with the sellers. It has been one obstacle after another, but I've been patient and I'm doing everything in my power to ensure that we can close smoothly.

I have 2 postings which cover the whole ordeal from the beginning, I'll paste the links below if you are interested in reading the details.

http://www.deangraziosi.com/real-estate-forums/my-deals/26046/just-place...

http://www.deangraziosi.com/real-estate-forums/my-deals/27680/1st-accept...

I also have my Realtor preparing a proposed P&S to submit an offer on an REO property, which if all goes according to plan I will get a fantastic deal on and pass on quickly to a cash investor whom I have on the back burner. This would be a double-closing if it works out. Which I hope it does!!

As far as confidence, not an issue lol. I get nervous still once in a while, but over-all it has little effect on me. Because I do not allow it to. I know that pushing thru this difficult stage is nothing in comparison to the years of success I will experience once I've broke into REI!

Don't be sad of your age, with age comes wisdom. You've experienced enough to know what you do and don't want. With some luck, hopefully you've met some people over the years who you can incorporate into your new career as buyers, sellers or investors. Besides you know the saying, better late then never! You still have plenty of years to enjoy your new success!

I wish you much success in the future. Hopefully we'll both have that 1st deal under our belts very soon!
-Mike Hutchins