What is a good exit clause to place in a contract that I plan to assign if I can’t find any potential buyers?
I read an article on REIClub’s website where it said not to use “weasel clauses” such as ‘this offer is contingent upon the approval of my business partner’ (although Robert Kyosaki stated that he used such a clause in his book Rich Dad/Poor Dad) because the author said that it doesn’t hold up in court.
Of course, the bottom line is to find a deal that is fantastic where I won’t need to use an exit clause but I would like to place an exit clause “just in case”.
What are some good ones and how would it free me from the obligation of the contract “just in case”?
So when you put “subject to a satisfactory inspection”, do you just tell the seller that I wasn’t satisfied with the results of the inspection so I’m backing out of the deal?
Do certain “exit clauses” work better in different states?
Purchase is subject to the favorable inspection and written approval of Buyer’s partner and/or investor (optional: within ___ days of offer acceptance).
Truthfully, the partner’s approval clause is a crap clause. If you properly go over a contract with a seller and they sign a contract with that kind of clause in it, then you may want to step back and see if it’s something that you really need to be doing because either the prop isn’t what you think it is, or the seller is so desperate that they’ll sign anything. Neither is very good.
Subject to a satisfactory property inspection is okay, though you may be required to define “satisfactory” especially if it had to go to court.
The single best contingency clause, and it’s pretty much standard everywhere, is subject to financing at X% rate for X number of years. IF you can’t get it, then you don’t have to buy it. Believe it or not, it’s much easier to convince a lender NOT to loan you the money than it is to get them to do it.
My situation is in assignment of contract where I’m trying to find a buyer.
Even though it is a “crap clause”, will it still protect me to get out of the contract in the event that I can’t find a buyer? I’m not planning on purchasing the property. My exit strategy is assigning the contract.
rkmin posted specifically pertaining to subject to deals or assigning contracts, your subject to obtaining financing clause is simply taking it too far.
By the way, the first thing is to find a motivated seller, why would anyone object to a partners approval? Spouses do it every single day - !