do you have an escape clause?

Bird Dogs, Wholesaling
1 
I was getting ready to start wholesaling and to use an inspection contingency, but I recently started to read steve cook's wholesaling course and he doesn't use one he considers it unethical. what does everyone here think?
2

Instead of an escape clause I say “Earnest money is the sole remedy upon default”. If I can’t close for some reason, the seller understands up front that they will keep my earnest money.

3

It sounds like a totally honest clause. Do you have any issues using that with realtors?

4

I don’t see how such a clause would be unethical. In California the standard California Association of Realtors purchase agreement contract has the following contingencies:

  1. If the loan cannot be obtained at a certain specified interest rate - either fixed or adjustable.
  2. If the appraisal is not equal to or higher than the offered price.
  3. If the property, upon inspection, does not meet with the approval of the buyer.
  4. If, upon receipt of the Transfer Disclosure Statement (a written statement by the seller of the overall condition of the property), the buyer finds items that he does not approve of.
  5. If the seller refuses to convey certain fixtures requested in the purchase agreement.
  6. If the seller refuses to repair certain items requested by the buyer in a Request for Repairs to the seller.

There are others but these are the main ones. Ethics has to do with the manner of doing business. As long as the terms of the contract are clearly written and agreed to between the parties, ethics has little to do with it.

Here, upon default, a seller can sue for non-performance (ask that the court force the buyer to buy) but generally the seller will take the deposit - up to 3% of the sale price.

5

There is nothing wrong with an escape clause. I have Steve Cook’s course & where he’s coming from is very legit. The Seller has already built up an expectation that they’re going to receive $. If you have a financing contigency, then if you can’t get a HML, then your price was too high.

If your price was low enough, you should be able to buy the property yourself & rehab even if you can’t wholesale it.

6

Hey,
If it is in the contract, both parties have signed it then it is a legal clause. Until it is exercised, it will probably viewed as ethical. When it is exercised, the seller will probably, in most cases, view it as unethical. Doesn’t make a whit of difference what he thinks, he signed the contract. If you made a good-hearted, sincere effort to secure the property, who cares what he thinks?
Peace,
Richard

7

In our City we have a 10 day inspection escape clause built right into the realtor contract. I cant see anything wrong with having one, I guess it maybe slightly unethical if you decide to use it solely for the purpose of getting out of a contract, rather than having something wrong with the home.

Eric Medemar

8

Nothing wrong with having an escape clause no matter what the motive. If the buyer negotiated the price low enough, then I think the buyer should be able to purchase it & still make $. If the price is not low enough, then the buyer can either go back to the seller to get a lower price, or use the escape clause to get out of the contract.

9

I know where Steve Cook is coming from. I struggled with that issue for a while myself. The problem is that the inspection clause is presented as a way to “get over” on the seller. If this is your intention than don’t use it. If your intention is to do the best you can for them then go for it.

Good Luck

Rick

10

you gotta have at least one escape clause! Especially if you are buying junkers to flip w/s…jeez!

In addition to inspection you also want one that covers your review & approval of contractor’s repair estimates. You don’t want to get zinged!

11

I use the “based on inspection” contigency clause. I use that to protect ourselves against getting swindled on a house. I fail to see how that’s unethical. It’s unethical to protect yourself from unethical people?