After immersing myself in various websites, articles and such relating to REI, I’ve learned sooooo many ideas, namely concerning weasel clauses. My question is where can I go to find the contract(s) that many of you fellow investors are using. Did you draft them yourself? I’m assuming you’re NOT using TREC contracts so that various weasel clauses can be inserted.
Secondly, where would I find an expereinced RE attorney in the Houston/Galveston area to advise me concerning do’s and don’t of RE contracts used in REI?
When buying MLS property Realtors must use TREC forms. REO sellers have their own forms too in addition to the TREC forms. The last two REO’s I bought had a free look clause that I could look and inspect and ask partners etc during this period and walk away without any reason given. It was also subject to financing at a certain rate and % of the sales price which made 100%. The TREC financing addendum was used to do this. On most deals I only use $100 or less as earnest money so no big deal anyway.
I will give you an example of an investor / ex partner I once dealt with. He is a nerd. He read a lot of books about investing and got the idea to have an attorney draw up his em contract. 37 pages of clauses and warranties that you would not believe. He was presenting this book to banks and asking for 5 year warranty on roof, foundation, plumbing, elect, ac, structural systems, the whole gambit. He never got anyone to read the dam thing. When I met him we went to look at a 4 plex on Freidrich Ln priced at $22,000. He got out his check list from a book I recognized and started to read the list out loud to me asking about ingress and egress and then ac ducts, water lines all kinds of absurd bs from the book. The property had a loan of $200,000 prior to foreclosure and had been vandalized which included sheetrock repair, sliding glass doors busted, appliances missing etc. Somehow I got us to write up the TREC contract as is where is without any inspections ( this was hard for him) at a price of $20,000 to close in 5 days. We bought it of course and spent less than $20,000 repairing the building and rented it for $1000 per month pretty fast.
You can use any form as a binding contract from a napkin to a 37 page book. In my opinion the TREC form is the best way to go. If you need some special clause added you may do so. Investigate the option clause of the contract and see if that may help you some also.
Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mobile
I use the standard TREC contracts because that’s what realtors, banks, HUD, and title companies are use to dealing with. You can add any clause you wish to the standard TREC contract under special provisions.
You’re use of the term “weasel clause” is a very unsettling to me. Are you implying that because I know and understand the law and protect myself, that I’m being a dis-honest, under handed weasel? I don’t feel that I’m being a weasel because I protect myself and my investments.
No Stacy, this doesn’t imply that you (or anyone else) is a weasel. Please, no offense! I use that term relating to clauses that one can put into their contract to protect them should something arise that would warrant “weaseling” out of the contract.
In Texas you don’t have to “weasel” out of a contract. As a buyer, you can walk away from any contract you want for any reason you want. You’ll lose your earnest money if you do, but that’s why you don’t put up much earnest money.
I walked away from 4 contracts in one month once. It was right before our boys went to Iraq and I couldn’t find any buyers so I decided to walk instead of being stuck with 4 properties. I lost $400 earnest money, $100 each property. I didn’t have any special clauses in the contracts, I simply said I was no long interested in buying at that price due to unforeseen circumstances.
Was I a weasel or a smart business man who could sense the market environment had changed?
Remember this saying, sellers have to sell, buyers don’t have to buy.
You are right the clauses are called weasel clauses in a lot of books and seminars that I have seen. Stacy is right too inthat if you put up little em you can just walk away if you have to. You do not want to get a bad reputation of being a weasel either way. A lot of the smarter sellers will notice all the clauses and say no to your deal. Remember my example earlier. My ex partner never even got a response much less an accepted offer. Just find good deals and there will be no reason to back out.
Good luck and thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mobile
Ted is absolutely correct, you don’t want to get a reputation for walking away. That should always be an absolute last resort.
Hope you didn’t think I was coming down on you too hard. It really bugs me when people portray us investors as, weasels, predators, or thieves when we’re really the good guys there to save the day.
Be very careful not to get to comfortable with feeling you can always “walk away” from a contract. If you’re outside of your option period and you decide to walk away, the Seller has legal recourse. Seldom used by Sellers, but you also don’t want to be the test case for an angry Seller. Ever tried to defend yourself in court…doesn’t matter whether you’re right or wrong, the cost is the same. Sellers have to sell and Buyer’s have to buy in a bilateral contract. Only in an option contract does a buyer not have to buy. Once the option is over, you now have a bilateral contract and both sides have obligations. Have a competent real estate attorney draft you a “Buyer” contract form. The TREC forms are the norm, but are better suited to Sellers than Buyers. Read and understand your contract forms well…your understanding of them will keep you from encountering many problems that can cost you your profits.
In the real world it cost’s money for a seller to exercise their legal recourse rights in the form of an attorney’s retainer fee and that’s why it’s seldom used. It simply isn’t worth the time or the hassle for them.
As Ted and I stated above and Guy repeated, you DO NOT want to get a reputation for not performing. It should only be used as an absolute last resort.