Contracts, contracts, contracts...!

[Danielle C.]

Hello!

I need to ensure that I understand the different main contracts that wholesalers use. I have quite a few questions about them, so I apologize in advance for the length. I have been searching BP for answers on contracts, however that only tends to bring up more questions!

Also, if anyone has any straight option, flex option or assignment contracts that they would be kind enough to share, I would be grateful to take a look at them. I have a few and would love to see a few more. Once I fully understand this topic, I can have a lawyer take a look and edit so that I have a solid standard, flex and assignment contract.

It’s important to note that I appreciate any and all feedback that I receive. Really :D

Here goes:

Flex Option Contract – Allows you to place home under contract with seller for a predetermined amount of time. This contract allows you to locate another buyer and have them “purchase†this contract. –ALSO – Allows seller to continue marketing house and allows them to sell to another buyer if they give better offer / close first. Can put in contract right of first refusal.

Straight Option Contract – Allows you to place home under contract with seller for a predetermined amount of time. This contract allows you to locate another buyer and have them “purchase†this contract. Under this contract, the seller cannot market or sell to another buyer without your express written consent.

Assignment contract – This is between the wholesaler and purchaser of the home. The addendum (?) allows the wholesaler and person who entered into contract with the seller to assign that particular contract to a new buyer.

Questions:

1. Am I understanding the definitions for flex, straight and assignment contracts correctly?

2. I know the assignment contract is used with the straight option. Is it also used with the flex option?

3. By adding the phrase "and/or assigns" to the buyer name section, you are adding a contingency allowing you to assign on a standard PSA, correct?

4. Should both the flex and standard option contracts have the right to assign clause or is this assumed due to the nature of the contract?

5. Is it correct to say that the option contract and contingency in a PSA allow you to do the same thing – market the house as a wholesaler?

6. When working a deal that is listed with an RE agent, they will require the standard PSA. Will they allow the and/ or assigns clause? I can’t see why they would.

7. In this instance, I assume that if you can’t find a buyer by the end of the inspection period, then you have to back out. Is there any other clause or time frame past the inspection period on a standard PSA in which you can legally back out of the contract without any legal detriment? I’m not so concerned with EMD. Well, I am, but that is not the end of the world if it’s $100 or so. My main concern is any legal issues, etc.

If you've made it this far, thank you! Any suggestions, answers or tips you have on any of this will prevent me from asking these questions again...! Seriously, thanks.

Danielle

[Bill Gulley]

Hi, after recuperating from yesterday's chat without the benefit of any beverage at hand, I'm ready to give an answer! LOL

I'll take the first few and leave some for others.

Your desription of a flex option is basically correct. It is basically an option that allows for a call or strike price with the optionee having a first right of refusal. The seller will continue to market the property and he may sell it, subject to the agreements made in the contract.

A flex option could also be assignable, depending on the terms agreed.

Using "and/or assigns" is not a contingency in the contract, it is a recital, more like an agreement that gives you a right to allow another to stand in your place. There are other recitals in contracts that allow or provide for an assignment of your rights upon certain events. A contingency to a contract is a provision that effects performance or that makes the agreement voidable under certain events or findings. A contingency upon the buyer obtaining a conventional loan at fixed rate at 7% or less amortized for 30 years is a contingency, if the buyer, in good faith, fails to obtain such financing, the buyer is under no obligation to perform.

Nothing should ever be left to be assumed in a contract, if you want the right to assign any contract, you need to specify that.

Bill

Someone?