In need of Wholesale contracts...

[Mike Nelson]

I finally found a GREAT DEAL in Washington D.C here's the numbers for you guys. I will get the property under contract for 60k it has an ARV of 210k and is in need of 40k repairs. My goal is to market it to investors for 100k.

My question for you guys being that this is my first time,what contracts can I use to make this deal go through? The seller told me that he wants a security deposit or something to make sure that things work out. Isn't that the EMD?

[Chris Williams]

Mike, if he is an attorney that means he is very familiar with contracts in general and probably familiar with real estate contracts as well, so you need to make sure your contract is legit as can be. With someone like this I would not suggest using any of the free one page contacts you can get anywhere online. You need to display yourself as someone who knows what he's doing. Call a real estate broker and ask if he will write you a Principal to Principal Purchase Agreement for a small fee once escrow has closed. $500-$1000 is good. I believe that this is a very critical thing in the beginning when you are not familiar with contracts that very few people talk about. But we must remember that real estate is law and one minor mess up can put you in a very dangerous situation.
Some things to have the broker write in the contract:
- And/Or Assignee of course.
- "This offer is contingent on Buyer's written approval of Subject Property, within 20 days from acceptance."
- "Seller warrants that there is no "sub standard" letter and or other issues, pending and/or forth coming from the City of " " and/or other entities." - Cuz honestly, why on earth would an attorney let a $210K house go for $60k?
- "In the event that Buyer is unable to remove contingency, Escrow Officer is hereby instructed to release deposit to Buyer within 48 hours of Buyer's written demand without further instructions from Seller."
- "Seller understands that Buyer is an investor and Buyer has the right to resell the property or assign the purchase agreement for a profit at any time."

You can have him reword it to whatever kind of verbiage he is used to.

You need to have every ducat in a row before proceeding. If you are dealing with cash you do not need a 45 day escrow. Before you put the property in contract, have several REAL cash buyers in line. People who are currently doing deals and can show you a POF. Any "investor" who is unwilling to provide a POF is not ready to do business. You don't have time to deal with spectators and tire kickers, as you will find most "investors" are. A real cash buyer can close within 7 days. A 20 day contingency with a 30 day escrow is perfect. If you can't close escrow within 20 days, you do not have a deal.

Questions you need to answer:
- What are your exit strategies?
- Do you already have specific buyers ready to go? If not, why?
- What Escrow company are you going to use?
- How are you going to do escrow? Assign, Double escrow???
- How solid is your ARV and where did you get it?
- How solid is your repair estimate and where did you get it?

Honestly, it is a lot but it is nothing to get nervous or anxious about, you just need to know exactly what you're doing. Once everything is right where it needs to be, the process will flow like water.

Let me know if you have any questions. That sounds like a killer deal and I would love to see you succeed!

Good luck!

-Chris