Typical Out Clauses

Hi everyone,

I have read about wholesaling and the first questions that come to mind are how do the “Out” clauses work? How often do you not find a buyer in a 30 day close period? I have heard of Out clauses like “Contingient on partner approval” and even “Contingent on reselling the property”

Do these really work??? What kind of buyer would sign a contract with a contingient that you resell the property for assumably more?

Is this how everyone does this? How often do people have to use these out clauses? Do you submit a letter stating that you could not resell the property thus the contract is null and void. Or do you submit a letter saying your partners did not approve this contract? Just trying to learn how this works.
I assume alot of people get “stuck” with properties they cant flip. Either they thought they were getting a deal or just bad luck in a month where no one wants to buy. I just wanted to know peoples experience with this.


To solve that problem is have a buyer line up ready to buy. Also the seller might want a small fee like $1500 for holding the property off market while you look for a buyer.

One of the most successful flippers in SoCal (Inland Empire) told us about three months ago to forget trying to line up money and buyers prior to a deal. He said just find the deal and the buyers/money will show up. He gave us a fresh example of this. He’s been at this for a few years, so he didn’t just fall off the turnip truck with this advice. Of course I’m already a believer, so he was preaching to the choir.

Meantime, just today, someone posted on my facebook wall about negotiating a deal with no money to pay for it. Within minutes he found the money. Actually a private lender heard that he bought income property and asked him if he “knew anyone” who needed a loan. I mean, it happened just like that. No prior contact. Is that replicable? I don’t know, but if the guy had waited for the money, he wouldn’t have negotiated the deal in the first place, most likely.

I’ve had this experience over and over, but one of the most spectacular examples was with my early apartment investments. I found and negotiated an obvious steal, but I had literally zero money to close.

After I signed the contract, I began brain-storming a solution. That went nowhere. However, within two days, I received a phone call from a guy I helped buy a house and arranged to borrow the purchase price privately. He asked if he could pay the loan off early. It wasn’t due for five years. I gulped and said, “No, I want my interest, not an early payoff.”

No, I didn’t say that!!! I said, “When can I pick up the check?” Again, it was all of two days after signing the purchase agreement that the money I needed for my deal came through (out of nowhere). It’s a little more complicated and interesting than that, but I don’t have time to impress you with the more juicy parts of that transaction.

BTW, the seller tried to get out of the deal I negotiated by offering me $10,000 to walk. So, you can imagine the deal I struck. I could have been paid ‘not to buy.’

After I closed on the deal, it took two 10-minute phone calls to get hooked up with some partners that wanted to split a quarter million dollar profit with me.

If we sift out the marginal deals, we won’t need to fret over weasel clauses.

Bottom line: If we can’t find a buyer in 10 days, either we don’t have a deal, or we have a marketing problem. Either way we’re not making money.

Just stick a clause into your purchase contract that says transfer of title is contingent on property passing a final inspection. With this, you can cancel right up to closing, if need be. No seller is going to question this, as it sounds logical that the house will need to pass inspection.

Thanks for the replies,

  • Dont alot of these houses not pass inspection though? Or are sold as-is ?

  • Also, I understand that if I cant find a buyer it may not be a deal, but I’m just asking, What IF. What if you couldnt find the money for the deal. What happens then? Im just trying to understand a little more before I try this.


If you’re trying to wholesale houses that need to “pass inspection” you’re probably not going to have that many wholesale houses to flip. Just saying.

Good wholesale houses are not going to pass inspection. That’s why they can be purchased so cheap. That said, you need a “good inspection” to estimate repair costs and confirm/affirm you’ve got the deal you thought you had. Meantime, if you’ve got a handle on the repairs, and professional-level opinion of value, and comps to prove it, you should have no trouble finding the funding, or the buyer.

If you can’t get a good estimate, the comps are bad, and/or you just cannot find a buyer, then you just back out of the deal. Every uniform real estate contract has an inspection clause with time limits to do your inspections. Of course with a house that’s a wreck (and a steal), you may want to negotiate a longer inspection period, simply because you’ve got more complicated issues to deal with than just fixing a leak, or replacing a blower motor on a furnace, etc. You might have foundation problems, or structural damage to examine and get repair estimates for. And getting someone to come in and do estimates (and return a bid) can be a time-consuming process.

You can get cute, like I have in the past, when I was insecure about whether I had a deal or not. I wrote into the purchase offer that I wanted 10 “working days” to get inspections done, and five “working days” thereafter to approve of the findings. Of course that gives me about 19 days to get my act together (or more with holidays occurring in between). “Working days” are Monday through Friday.

The more special clauses you insert the more flags this raises.

Also, if you’re picking up deals off the MLS, you’re likely to have a bunch of competition if the deal looked half-way interesting in the first place. So, adding in a bunch of phony-boloney clauses is just the worst idea.

We can’t steal in slow motion. Great deals usually require speed and cash. In fact you’re competing with buyers that have waived all inspections, offered all cash, with no financing contingencies. I know one investor who does this and then makes out his earnest/binder deposits for the entire purchase price.


So it does sound like there are ways out of a deal.
I am actually interested in buying a house cheap with cash, and rehabbing it. But as well with those when you buy cheap you can buy something that is trash. I am not looking for trash but more like a trashed up place that wont fall down :slight_smile: - there are always surprises and im no building inspector, so to know that its defiantely possible to contract a property and back out if I dont like it later is a good thing.

Can you still back out of a deal that is “AS IS” if your inspector tells you that there are alot of issues, and will cost way too much to fix. Are you still able to back out even though you signed the contract “AS IS”? Sounds alittle fishy to me?


AS-IS means just AS-IS. My 2 cents. If you put a home under contact with me AS-IS and you back out I would sue you for ever red cent you have.

Buying “as-is” doesn’t mean you have no “escape clauses.” “As-is” just assumes that you’ve already been in the house, know about the important problems, and assumed the rest are problems, and go forward.

It’s probably not smart for someone with little, or no, experience to buy this way. It takes experience to recognize what you’re supposed to recognize. It takes practice to quickly assess repairs, upgrades and come up with repair estimates.

As a result, you need to give yourself time to get the professionals in, to give you feedback about what you’re buying. It’s not rocket science. It’s just a matter of recognizing problems.

For example, cracks in the walls and ceilings indicate settling problems. This is always a foundation problem. If the floors show cracks, you’ve got heaving/expansion problems. Of course this automatically leads to the assumption you have grading problems (incorrect, inadequate water run-off), or failure to train water far enough away from the house. Expansive soils (clay) are monsters to deal with.

This requires special attention and specific solutions including extreme control of water run-off. I mean it’s not like just laying a down spout tray on the ground and calling it a day. It’s gutters, trenches, drain pipe, and grading corrections to make sure NO water stays near the house.

If there’s discoloration around the vents, your furnace is shot (and deadly). If air doesn’t blow in all the vents, you’ve got duct leaks, or an inadequate blower (more common on older houses, or those with additions).

If there’s stains on the ceiling you’ve got a leaking roof, or plumbing leaks from an upstairs bath/laundry, etc. You look for weak floors around toilets. Often this requires substantial floor repair/replacement (to the joists).

Then there’s the plumbing fixtures. Do they drip? Can they be turned off and on with ease? Can you turn the supply lines off and on with ease (most of the time these don’t actually work correctly, and are often replaced anyway when new fixtures are to be installed, etc.)?

Sewer problems aren’t always obvious and you can’t always verify what you’ve got. If the water isn’t on, it’s then a matter of looking for clues that this has been a problem in the past. Sink holes in the lawn might be a clue. Extra green grass in a spot over the sewer line is another. Evidence of backup in tub or shower floors is yet another. However, the easiest and may the most reliable method of checking for problems is to run all the water fixtures at once (sinks, tubs, showers) and let them run for several minutes (don’t get in a hurry), and then flush all the toilets at the same time. If the main line will handle all that, it’s likely to be clear and functional.

I have little experience with septic systems except when they’re having trouble, you can spend a boatload of money fixing/replacing them. It’s mostly about capacity, rather than function, but you’ll need professional feedback here most likely.

Then there’s cracks in the exterior walls which can mean a couple of things; bad installation or foundation problems.

Cracks on exterior walls (stucco) that have been patched scare me to death. Same with interior cracks as I mentioned. Something is/was terribly wrong with the house; settling, poor foundation work, heaving, and/or poor drainage. I need to know why and how recently. If this is an old house and the cracks are not large, I can be assured this isn’t a serious, impending issue. But I need to know it can be controlled, if not stopped.

Stucco is often misapplied “hot” and cracks appear all over the place. This is not the same as foundation problems. It’s an appearance problem, and if not fixed could turn into an insect infestation problem, if not a water intrusion problem.

Board and Batten exteriors are the pits. The battens warp and expose cracks. They open the house to water and insect intrusion, and plain old dry rot. FWIW

Termites are another issue in some parts of the country. Some states require inspections regardless of the terms of the contract. I like to use termite inspectors when it might be possible to renegotiate the price based on what they find. Also, I’ve missed termite damage and lived to regret it.

Inspectors look for at least “sand particles” on the ground, in window sills, at the base of any door jambs (garage, back door, etc.) and pin holes in the walls that will indicate active termite activity.

It seems to me that cracked driveways and patios go right along with foundation problems. So, if the driveway looks like a relief map of the Rocky Mountains, it’s a safe bet the house has some foundation and settling issues.

My friend Scott bought a house like this for cheap, but discovered about two years into ownership that the exterior sill plate had detached from the foundation, and the outer wall were actively shifting off the foundation about 1.5 inches. He fixed the drainage problem, but the shifting had already occurred. Meantime, the driveway was a clue to a potential problem.

So, basically you’re looking for problems with water damage, foundation defects, functioning fixtures and appliances, and insect infestation for starters. Then it’s about estimating costs of repairs.

That all said, and just as importantly, is knowing your market values. This is 90% of your solution to any buying question. Everything falls from there.

That’s a lot, but that should give you some clues of what’s involved in making an “as-is” offer.

Frankly, if you do this often enough, you’ll get to a point of being able to make “as-is” offers on houses sight unseen. Meantime, you’ll make quality assumptions, and knowing the market will give you enough confidence to lock up screaming deals, and then take a closer look.


Offer subject to buyers inspections.
Offer subject to an acceptable buyers appraisal.

That’s all you need.

I have only done 1 wholesale deal. In my contract I used a “subject to business partner’s approval” 10 business day contingency as my out clause (my re attorney said I should have called it a study period). Plus I was wholesaling the deal, and the seller knew exactly what I was doing.

As for the “As Is” issue: I thought buying As-Is just meant that as the buyer, I would not ask the seller to make any repairs, and that if I found out about some terrible issue with the physical condition of the house after I took title, I would be stuck with it. I do not believe it means that I don’t get to inspect; and if I determine that the repair bill is too high or too extensive or whatever, I can cancel the contract without risk of being sued (assuming of course I cancel within the “study period”).

Yes, that is correct.