My Escape Clause

How do I write in my contract to the seller that if I don’t close in a certain amount of days, I can back out without being liable for the property? Anyone? Please help as I am considering making my very first offer within a week!!! so exciting!!! :slight_smile:


Even though I haven’t done anything outside of a lot of studying on wholesaling (so who am I really to talk) I would say if you want to keep a respectable name in this business you should be prepared to close yourself on any house you make an offer on regardless if you can wholesale it or not. Stay away from weasel clauses like “subject to my partners approval.” Only back out if you are unable to get financing or upon inspection the house is in MUCH worse shape then originally thought (even that is a bit wrong in my book as you should then just renegotiate the terms). Just my two cents


Thanks Scott,

I fully intend to be total ethical with all my deals. My main concern was finding the finances to close the deal. That’s why I was inquiring about the escape clause. This way I’m not liable to purchase a property that I do not have the funds to. Please advise.

What kind of contract?

The purchase contract to the seller which I will in turn assign to a buyer! Well, hopefully. That’s why i’m looking to structure my escape clause if I can’t find my buyer in time!

This is what I use:

“The Buyer has the right to inspect the property anytime within the next 10 days. If the seller fails to allow the buyer access to the property during the 10-day period, the buyer may at anytime cancel this agreement by written notice to the seller. If the buyer feels that the inspections do not meet a satisfactory levels as judged solely by the buyer, this agreement can be terminated by written or verbal notice to the seller within the 10 days inspection period. Any and all deposits will be refunded to the buyer within 5 days of the seller being notified”.

Keep in mind only one escape clause matters in a contract, and that is the one that goes the longest. Don’t jam your contract up with junk clauses.

Good luck

BINGO! That’s exactly what I was looking for!!! Thanks so much!!! You’re the man!!!

I just add an option period wich gives me the right to walk away without needing a reason. I usually make my option periods 15 to 20 days.

how do you word your option clause?

eric, what do you consider “junk” clauses?


I use state contract and ours already has the clause in the contract. I just specify the number of days and give them $20 for the option

Aren’t the clauses important so that if something comes up you can get out from the deal?

Well, I usually don’t like to get under contract if I am not sure of the numbers. I only had to walk away twice, and the only thing I did was give the seller a call and tell them after re-evaluating the numbers, I am not comfortable with the deal so I am cancelling the contract.

They are not going to take you to court to force you to perform and buy the house, and even if they did… you dont have the money.

Having that said, I still use the option just in case I run into a crazy person with nothing better to do than try to cause me problems.

I also do my best not to get under a contract on a property if I am not comfortable with the seller.

I consider junk clauses anything that will raise a huge amount of suspicion on a homeowners part. Junk clauses that I have seen used most often are “Offer contingent on approval of partner”, “offer contingent on financing” (why would a seller want to take an offer if your unsure".

Basically you only need one clause per sales agreement. Inspection clauses have also been included in many of the bank agreements that I have done.


When it comes time to get out of a contract you will want to have set things up correctly ahead of time.

Let the seller know that you have to meet with your business partner and go over the contract with them. Always project your next meeting with your business partner to 3 (or more) days into the future. This will give you enough time to pitch the property to your list (wholesale) or do your proper due diligence (rehab or rental) before putting yourself at risk.

As far as escape clauses go…you want to use a standard state contract but alter a few words in your favor. When I first got started I would show up with these seminar contracts and the sellers, while motivated, would tell me they cannot in good conscious sign my contract.

In Florida we used the Far-Bar, removed the state info so we were not in violation and then changed specific clauses throughout the contract to protect ourselves, give us the right to make up to $1,000 in repairs and even list the property on the MLS should we choose to do so. In Washington, New York and New Jersey we applied the same principles.

Our contract has been reviewed by at least 30 attorneys (that we know of) and has only made it to court once. It has been on the closing table of at least 250 transactions and I am certain many other investors have copied it after challenging me on it.

Enough about that, here are some very specific ‘escape clauses’ if you will.

Let’s go over each of the items in detail.

1. The ability to back out for whatever reason. The amount of time (20 days) is notated in another section of the contract. The wording here is crucial. Notice it says, “Buyers Satisfactory Inspection”. The standard state clause requires you to have a ‘licensed’ individual inspect the property and submit in writing the reasons why the property is not acceptable. We have also changed the contract on page three “Inspections, Repair and Maintenance” to reflect the same.

2a. Forty-five days from acceptance. Lets face it, this is a very cut-throat business. I am a very nice person, but I don’t like losing money. If you are not able to close within the forty-five days but can close on the 47th, ‘Acceptance’ is defined as the date of the final signature to the contract. If necessary you may sign the ‘Final Corporate Approval’ and extend the contract as needed.

2b. This is a what I like to call a ‘friend-builder’ clause. By signing the contract they are agreeing to get the tenant out before closing. You will help them along the way but essentially they are committing themselves to a closing date sometime in the future after the tenant is out. This keeps them from letting the contract expire because they were unable to evict their tenant.

Important to notate:
Your preliminary and final corporate approval will only hold up in court if you remember to sign the ‘final’ corporate approval on every contract before closing. Not doing so could subject you to liability in a court case. In other words a judge may consider this only a weasel clause if you do not practice it throughout your business. Still, 80% of all court cases never make it in front of a judge and it will cost a seller $1,500 to start a lawsuit for $1,000.

Some of my recommendations may sound harsh. You need to keep in mind that this is business, not a popularity contest. Just like you, I don’t like surprises, but when they come, I like to be prepared. Being prepared can mean the difference between handling the situation with a phone call or losing $25,000 in a lawsuit.

Our clauses were developed over time through trial and error. Error meaning they cost us money. For those of you that have fear about putting properties under contract, I fully understand. Hopefully as cowboys we have Pioneered before you and ‘caught the arrows’ so you are now able to setup camp.

One of the stories I used to relate to new Franchises is an analogy of Brinks. Funny because yesterday I saw a BRINKS truck at the supermercado (supermarket) here in Colombia. The analogy says Brinks does not start over in each city and experiment with their policies and security measures. They use the same systems in Pahokee, Kansas as they do in Brooklyn, New York. The toughest cities determine the rules.

Whichever contract you choose to use, make sure it has been tested in tough markets. This will keep you out of court and let you live a more peaceful life.

Hope this helps,

Matt Gerchow
Currently In S. America for 4-Months…Next Stop…Thailand for 6-Months