Hello can someone tell me what contract should the escape clause go too. is it the Purchase slaes agreement or the Assignment contract Thank you.
the purchase agreement… make sure your using the inspection contingency clause as well… the financing one can get you sued unless you have extremely bad credit and cant close on your own funds… :biggrin
The question is that would you use an escape clause to escape an assignment fee :biggrin
Hi,
That is not true the financing contingency can not get you sued if you answer your contingency contract withdrawal accurately as in "The points, closing cost's and interest rate offered were unexceptable for the properties purpose and financial position"!!!!
I don’t think there is an attorney who would recommend there client file suit or a state government / judge anywhere who will not uphold the buyers rights to refuse an unexceptable loan offer because of cost, interest rate or points! (Unless of course you as an investor are not bright enough to know not to include an interest rate range, less than x points or not to exceed xxx closing cost in the contract!)
Then of course your on your own and may get what’s coming to you!
I do not include any contingency language in the assignment agreement and the Down payment or initial payment made I always make sure exceeds my earnest money already paid and I always word it and tell the end buyer that the initial assignment fee is non refundable!
In most of my assignment agreements if the buyer is paying my whole assignment fee upfront then that is “Non Refundable” as the buyer had better know at that point that they can close, and the termite and home inspections are clean, and loan approval contingencies are removed at the time you assign the property! Make sure the end buyer has a loan approval before the assignment!
This person is taking a contract with a earnest money deposit already in escrow and as an investor I have time tied to a property so the initial payment to buy the assignment is “Non Refundable”
GR
Thanks everyone for your feedback just wanted to make sure
i hear you gold river… but is it true that if you have a financing contingency in place on your (Purchase Agreement) and cant find someone to assign the contract to and have to back out due to financing the seller could sue you to force you to buy the property and prove that you cant be financed???
The law favor buyers in every state. That is, sellers HAVE to sell, but buyers don’t have to buy.
If the buyer fails to close, his earnest deposit is contractually forfeited as liquidated damages. However, the larger the deposit, the more likely the buyer is to get his money back.
Case in point. My mom was selling a rental house. The buyers backed out of the deal and canceled the contract a week before closing. The buyer’s inspection periods had expired, but the buyer demanded his $2500 deposit back. My mom would not release the deposit back to the seller, because she had the right to it as liquidated damages, according to the contract.
The buyer sued my mom for the deposit in small claims despite their claim being bogus. The judge awarded the buyer a judgment for the earnest deposit plus court costs. My mom ended up with $2800 judgment on her credit.
The terms in real estate contracts (rental agreements, too) make ZERO difference to judges whatsoever. The law is always interpreted in favor of buyers, not sellers, and in favor of renters not landlords. Whomever owns the property gets the short end of the stick.
So, the moral is, when buying, put up a big a deposit as possible. It makes a point about one’s seriousness, and it guarantees its return when the deal goes bad.
As a seller, it’s wiser not to demand high earnest/binder deposits. They are worthless as liquidated damages anyway. Instead get small ones that make it harder for the buyer to justify the expense of trying to recover. Not all judges will award court costs, so make it painful to try to get back a smaller amount.
Otherwise, if you’re comfortable getting sued and losing; and adding insult to injury by getting a judgment on your credit, then get big deposit and try to keep them as liquidated damages. See how that goes for you.
Meantime, weasel clauses are for amateurs. It’s a way to make sure smart sellers know we’re not ready for prime time.
I’m not saying you should not have inspections, or you should ignore the time frames you’ve agreed to. However, the standard real estate board contracts today are not particularly favorable to one party over the other, and have built-in safe guards that gives the the buyer and seller enough time to take care of business.
If you need 60 days to close (to find a buyer for your deal), just work that into the contract. 60 days is not unusual for a deal that requires lots of work, except that if there’s lots of offers on the property, you might not be competitive asking for a long escrow …or not having cash for the deal. Just saying.
Frankly, I’ve told many sellers that,
"I need sixty days to find cheap enough money to make this deal work for the price I'm having to pay here. If you would like an escrow that only gives me half that time, than I suppose I could, if you knocked $20,000 off the price. Would that short of an escrow still work for you?"
You’d be amazed at what kinds of trade offs are available in your negotiations, if you expand your thinking.
Don’t load your contracts with a bunch of weasel clauses, if you want to compete with people like me.
:beer
Purchase contract. Put in an inspection contingency or what also works is putting in contingent upon partner approval. Thus the dog next door could be your partner and not like how it smells thus you walk.
Thanks for the suggestions.
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The contingency clauses I have in my Purchase Contract (no broker) are subject to partner’s approval, subject to acceptable appraisal by buyer and if buyer defaults, deposit is sole remedy. Are these sufficient enough or should I change?
Also on my contract, it states that: this agreement may not be assigned by Buyer without the consent of Seller. This agreement may be assigned by seller and shall be binding on the heirs and so on so on so on. Is there a way I can reword this to let the seller know I will be assigning the contract upon closing? Do I need to worry about saying anything to Seller that I will be assigning to an end buyer? Inputs are requested please…
Thank’s for that information. It would be a big help for us as newbies in realty properties investor. Thank’s a lot & more power! 
Escape clause is a part of the contract that permits other parties to cancel a part of the contract in case any situation occurs or failed to occur. The point is, read the contract wisely and carefully before signing anything.
[size=10pt]Chris Evans[/size]
I don’t pay an earnest money deposit if at all $100 tops. I wholesale REO"S using realtors, telling them upfront what I’m doing. Make sure contract is assignable, and always have contingency clause stating purchase of this property is contingent upon finding a buyer.
:shocked hey Bennett Nic what city are you doing this out of where the agents are letting you do this with that contingency???
I’ve always used this contingency, never had a problem. Short, sweet and honest. Cincinnati, cleveland, Philadelphia, Pittsburgh, Flagstaff are just a few. If you make your contingency clause straight out, they like it, when you make it contingent upon, this, and this, and this etc. they think your hiding something. I’ve never had a problem with it, maybe somepeople do.
:biggrin sweet :beer
javipa
Too bad you didn’t have your mother appeal the decision. In many jurisdictions the small claims court judges/ commissioner have as much legal training as my cat, and their decisions are based on how they feel about things. I’ve lost 2 solid small claims cases, but as the defendant I was allowed to appeal, which overturned the “judge”. In one case I had to appeal, the original decision seemed to be based on the plaintiffs plunging neckline and a coy delivery of her case.
A couple more comments. First I hate the partner thing unless you really have one in which case I note the partners name in the offer.
In the old days before he died my older brother was that person, now days it’s my wife. I would hate for it to end up in court and have to bring in my cat. Plus when a judge hears the answers to questions like how many deals have you done together etc. avoiding perjury is a tough one.
Secondly, often times a seller can keep the money by giving an option and not earnest money, and when the buyer balks he’s legally only in the position of having a option expire and he can ask for refunds for forever. Other words be ready to forfeit earnest for bogus escape clauses or make the earnest money a small amount so basically an option.
Bay Area Brian,
If I had known better, I would have tried to help my mom appeal that decision. But I didn’t know what I was doing, as in “I”. So my mom lost the sale and a few hundred dollars and a ding in her credit. It made us sick to say the least.
Meantime, I love your “option” alternative. I would imagine this would be more workable when there is a buyer’s frenzy. Otherwise, it might be a hard sell to get the buyer to cough up what is effectively a non-refundable deposit, in the form of option consideration…
:beer
You sound a lot like Barney Zick… :biggrin
I am responding to a reply message by javipa. Normally, you have a 10 day due diligence period at which time you can legally back out of the purchase…at least on the contracts I have used. Reasons would be you don’t qualify for a loan, sales price above appraisal, etc…