The Real Estate Sales ContractAs a real estate investor the very first legal document you’ll execute when buying or selling your flip is the real estate sales contract.

Regardless of where the property is located or its condition the sales contract is your official offer to buy a home or accept an offer from a prospective buyer.

Either way, a properly constructed sales contract can ensure a smooth closing with no surprises. What should you look out for?

If You’re the Buyer

If you’re buying a house to flip and are preparing a real estate sales contract, there are certain parts of the contract that demand your complete attention.

Many sales contracts give you, the buyer time to gather information about the property and provide a way out of the contract should you change your mind.

The contract may require you to obtain financing on or before a certain date. If you don’t receive your financing approval by the date listed in the contract, there’s a possibility you can not only lose the house but lose your earnest money deposit as well.

To avoid this, have your financing lined up before you ever make an offer.

Negotiate enough time to have the property inspected and should there be problems with the inspection that could cause a lender to refuse a loan, make sure there’s a clause that allows you to walk away from the deal should the inspection not meet up to your standards.

Make sure you know who is going to be responsible for certain closing costs.

If the seller agrees to pay for some or all of your closing costs, have those costs itemized with an amount listed in the contract.

If You’re the Seller

When first accepting a real estate sales contract, if the buyer is obtaining financing, require a preapproval letter from a lender to accompany the contract.

If there is no preapproval letter, ask that the buyer to contact your mortgage lender for a prequalification.

Set specific performance deadlines for the buyers to follow. If the buyer wants to inspect the property, provide a cutoff date for the inspection to occur.

If there is financing involved, provide a cutoff date for the buyer to obtain financing. Without definite timetables for the buyer, you can risk having your property locked up for weeks only to discover the buyer can’t follow through.

If the buyer asks you to pay for certain closing costs and you agree, spell out the amounts in the real estate sales contract addendum and have the buyer initial the amounts.

Whether you’re the buyer or the seller, the sales contract is the written rulebook for the transaction.

If you’re not a licensed real estate agent, find one to help you negotiate the transaction. Real estate sales contracts are designed to protect both parties, and with regards to real estate contracts, mistakes can be costly.

Talk soon,
David Slabon