My previous post described how word gets around in the real estate investing community. Investors generally know the reputations of other players in their market and act accordingly. However, as much as one investor might be wary of another, you never know who is going to have a deal you may want. Additionally one cannot ever know the whole story of why someone has the particular reputation they do. It may be unfounded and based wholly on rumor, or it may not. People also can change over time, some for better, some for worse.
The fact is in the real estate investing world you just never know completely what or who you could be dealing with. You really can never know the true motives of why someone is selling a property or working a particular deal. It is always wise therefore, even in the best of situations, to protect your interests from potentially unscrupulous players and actions. A handshake is not enough anymore. In this post I want to talk about one easy method to do just that. That method is to always use a purchase and sale contract.
We all like to think that everyone will keep their word. The truth is that most folks likely will. But you can never know for sure who will and who will not. It is just so tempting to a property seller to agree to a higher price when offered, even after an agreed upon price sealed with a handshake. Unfortunately, that handshake offers no proof that you actually agreed to a price in the first place. You have to protect yourself and the time you spend looking for and evaluating potential deals by binding them to you with a written purchase and sale contract. Handshakes just will not do in today’s world.
Being ready to utilize a purchase and sale contract does not mean that you need reams of paper, paragraphs of legalese and approval of an attorney. You can go that way if you wish. But I would recommend something a bit less complicated if you actually want to acquire a deal of two. Your purchase and sale contract should be simple. It should be simple to have on hand, simple to read and simple to use.
What’s In Your Contract?
All a purchase and sale contract needs are a few basics. These are:
- Name of the seller.
- Name of the buyer.
- The property address and/or legal description.
- Purchase price.
- Contingency clauses pertaining to financing or property condition.
- A date to close or complete the property sale.
- A place for the buyer and seller to sign and date the contract.
The above seven items are really all that is needed in your purchase and sale contract. All of that other stuff you see in most purchase and sale contracts is fluff designed to protect the realtors involved.
These seven items can all easily fit on one simple page. A page that you should have with you at all times. Because you never know when an opportunity to buy or sell will present itself. Sure, you can use those long winded contract if you want to, but there are no words that can really make someone buy or sell if they do not want to. So while you may not be able to force a sale, with a contract you can make things difficult for someone who wants to go back on their word with you. In a future post, I’ll discuss how.
