In Wholesale Real Estate Training – Writing The Sales Contract is one of the most important factors in locking down a transaction, then selling the rights to the property. If the contract is not done right, you have nothing to sell. So, this is one of the most important parts. I recommend using our template and taking the full course on Wholesale Real Estate. Learn more here.
Real Estate Wholesale Contract
Having a good wholesale real estate contract is not as hard as you think in the beginning. You just need to make sure not missing any of this important aspects and stating everything extra clear. It’s all black or white in legal documents, it is there, or it is not there. And consequences can be devastating if something important is not there. You must be foresighted, anticipate any bad scenario and include clauses to get you out of them.
Structure Of The Wholesale Real Estate Contract
Start by using your local commission template, have an attorney create you one, or simply buy one from us. Not to brag, but our template is written in a way to benefit the buyer (YOU), not in a neutral way.
Mostly, the structure is the same, so you can understand and fill it out the relevant sections as indicated below:
- Parties. Have the parties involves, that is, the seller and the buyer (you) identified at the beginning of the contract.
- Property. Find the legal description of the property by going to the local appraisal district. You need to find the lot and block description city, county and complete the address section in the format requested. Also, make sure to state what comes with the property and what does not by using the inclusions, accessories, and exclusions section.
- Sales price. Always select the Third-Party Financing Addendum.
- License holder disclosure. This must be filled if you or anyone in your LLC is a licensed agent
- Earnest money. An amount held by the title company while making sure the property title delivered is totally free of legal or financial attachments.
- Title policy and survey.
- Disclose the name of the title company you’re working with.
- The commitment section gives you time to check irregularities found by the title company during a certain period and back out of the business if needed.
- Like the Commitment, the survey is another loophole that can favor you.
- Use the objections in case you have something new to discuss. If the deal is not completed, you’ll get your earnest money back.
- Title notices are just a standard subsection. Feel free to read them later.
- Property conditions. This is an important section to fill as you’ll be showing this to the next potential buyers. This reveals the real, current conditions of the property. It should the repairs that need to be done, but the seller won’t perform as the property is being sold as-is.
- Closing. Make sure to put a deadline instead of a date at the closing. 15 days after execution is usually time enough.
- Possession. This clause states that the new buyer will get the keys and the right to move in just after funding the purchase.
- Special provisions. Here, the wholesaler should disclose he/she is using financing or a line of credit to fund this transaction. This will get you cover in case of changing your payment method from cash to another one without breaking the contract.
- Settlement and other expenses. This states the seller will have to pay you a closing cost equal to 3% of sales prices or up to $9000.
- Default. Protects you in case the seller backs out. In case of having no loopholes, this clause will guarantee you keep the earnest money or sue the seller for a substantial amount.
- Mediation. Makes sure you split the mediation clause in case of disagreements before going to court.
- Attorney fees will be paid by the part in fault.
- Escrow. Similar to the title company, the escrow ensures the process goes accordingly and fairly to each party.
- Pay attention to the Federal Taxes Requirements and pay them, as necessary.
- Both, seller, and buyer must receive Notices via email and post mail.
- Check what other forms are being used in your contract in the Agreement of Parties section.
- Termination Option. Commonly a term of 10 days and $100 is set, but this depends on the property.
- Follow your contract and Consult an Attorney before signing. In case you do, fill the blanks with the right information.
- The Execution Date is the one when everybody signs the deal.
- In case the wholesaler is a licensed agent, the Broker Information section must be filled out. This will get you another extra 3%
Loopholes In A Real Estate Wholesale Contract
You have 3 different ways to get you out of a contract:
- Option period. You can back out for any reason. Make sure to put as little money as possible there.
- Seller disclosure. If seller never disclosed something important or gave you a required documentation, you have the right to back out of this deal unharmed.
Title commitment. You can always use this clause when still on time to get your earnest money back in case you figure out this deal won’t go anywhere.