Wholesale Real Estate Contracts | PART 2 | "Sell-Side" Purchase & Sale Agreement | Ben Clardy | Skillshare

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Wholesale Real Estate Contracts | PART 2 | "Sell-Side" Purchase & Sale Agreement

teacher avatar Ben Clardy, Real Estate Coach

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Taught by industry leaders & working professionals
Topics include illustration, design, photography, and more

Lessons in This Class

4 Lessons (30m)
    • 1. Class Introduction

      0:35
    • 2. "Sell-Side" Purchase & Sale Agreement | PART 1

      11:59
    • 3. "Sell-Side" Purchase & Sale Agreement | PART 2

      15:08
    • 4. Class Project

      2:38
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About This Class

Welcome to PART 2 of Wholesale Real Estate Contracts.

In this class we'll be covering the "Sell-Side" Purchase & Sale Agreement.

This contract is especially useful for double-closing on a wholesale Real Estate deal. This "Sell-Side" version of the Purchase & Sale Agreement would be signed by YOU and the End Buyer of your wholesale deal. This allows you to safely and effectively control that piece of Real Estate as you arrange a double closing that will transfer ownership of the property from the Owner to You - and then immediately from You to the End Buyer.

I will slowly walk you through each line of the contract so that you understand why each line is there, why it's important, and what it can do for you.

Every word of the contract is there for a reason - whether it's to help you get offers accepted, to control deals, or to protect you from liability. By learning how the contract works, you'll be more effective and confident Real Estate investor.

Remember to download your contract from within the resources section of this class.

Finally, be sure to enroll in the other 4 parts of this class series:

Wholesale Real Estate Contracts | PART 1 | "Buy-Side" Purchase & Sale Agreement

Wholesale Real Estate Contracts | PART 3 | Assignment & Option

Wholesale Real Estate Contracts | PART 4 | Invoice & Marketing Fee Agreement

Wholesale Real Estate Contracts | PART 5 | Amendment & Finding A ROCKSTAR Closer

Meet Your Teacher

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Ben Clardy

Real Estate Coach

Teacher

My name is Ben Clardy.

I'm a Real Estate Entrepreneur, but I'm a teacher at heart.

I create HIGH-QUALITY / LOW-COST Real Estate courses for my students.

I've made MANY of mistakes in my investing career. One of them that I will always remember is the day that I wrote a $25,000 check to a "Real Estate Guru" that promised to teach me everything I needed to know to succeed in Real Estate. That was a BIG mistake.

I lost an incredibly large amount of money that day, but I did learn something important:

I learned that I wanted to save other people from making the same costly mistake.

You see, it's not uncommon for people so shell out 10k, 20k, or even 50k dollars in order to learn the ro... See full profile

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Transcripts

1. Class Introduction: Hi there. My name is Ben clarity. I'm a real estate investor and coach and I'd like to welcome you to this class series on wholesale real estate contracts. This is part two of five. And in this part we're going to be covering the sell side, purchase and sale agreement. It looks a little something like that is a two page contract. You've got the main page here, and it also has an addendum. We're gonna be going through both of these line by line so you understand how they work. And I'm also going to be providing you with a downloadable copy that you can put to use in your business. So without further ado, let's get into it. 2. "Sell-Side" Purchase & Sale Agreement | PART 1: Okay. Now let's get started on the selling side, purchase and sale agreement. Now, this is the this is the biggest one that Res and this package of contracts and this is the only two pager. The reason this one's a little more complex is just because you want to be extra particular whenever you are double closing on a house. And that's that's really the only time you would use this contract is if you are double closing a piece of real estate to one of your wholesale investors are wholesale buyers. That's what this is used for. Double closing real estate. Now, let me go ahead and open this up and we're gonna go through this one line by line just well, just like we did on the last one. Alright, let me, let me adjust this little video here, okay. All right. Now this is again, this is this is the only two pager. It is this first page that has the property information, the terms and conditions, and it also has and addendum attached to this particular contract, which is the sell side purchase and sale agreement. Okay. So let's get through this one here real quick. Now this top section is all about the subject property. So in this top blank is where you put the property address. The second section here, purchase price is where you would put out the purchase price and digits like 500050000. And then the second blank is where you would write it out in words like you want on a check for $50,100. The next blank here is the closing timeframe. So if in your your ADB contract, you have a closing, you know, within the next 30 days that's closing on, let's say August 20th or whatever. In this blank is where you would put that same date? August 20th. Okay. This next little section here is where this is pertaining to the earnest money deposit that you collect from your buyer. Okay. So you have the contract together on the house. They'd be contract, the buy-side contract. This one is the sell side contract between you and the buyer. So you're collecting your buyers earnest money deposit using this contract. And this is the section that details that. So whenever whenever the buyer signs this contract with you, they are agreeing that within 24 hours of acceptance, They will supply a 1 $1000 non-refundable deposit into your closing attorney or your tile companies escrow account. And then this little section here says Where they can contact either the closing attorney or the title company. You can just put a phone number right here in this blank. You're the Title Company or closing attorney's phone number. And then and then the buyer will contact them and coordinate that earnest money deposit. Alright, next to this whole next section here is terms and conditions. Number one, here is the office that the closing the closing is occurring at. So in this blank right here is where you would write in either your closing attorney or your child company. So you are controlling where the closing occurs. The second line here is saying that the buyer is paying for the closing costs in this transaction. So again, you've got two contracts going on here. You've got the buy side, which is the AB, and you've got the sell side which is BC. So you're going to cover the closing cost on the a to B, but the buyer is going to cover the closing cost in this contract. And this closing, which is the B to C. Section three here says the buyer may not advertise or promote the property prior to close. And this contract is non assignable. There's kinda two things going on here. The first section, or the first, this line here says they may not advertised or promoted. This is the thing. Whenever you're selling a wholesale piece of real estate to one of your buyers, they need to buy the thing, you know, you don't, you don't want them trying to turn around and basically double close it again to somebody else or assign it again to somebody else. You want them to close on it. There's enough complexity managing two sides of the transaction with the a to B and B to C. You don't need to have any C to D stuff going on or D to E. I mean, that's just ridiculous, like complex, complicated. So what this line does, it kind of locks in that buyer and says, Yeah, they are closing on this house. They're taking tidal and they're not going to be assigning the property to somebody else. So it's, this line keeps the transactions simple. If your your buyer for this contract has anything else in mind other than closing on the property and taking tidal. This line is what's going to prevent them from doing anything, goofy. Alright, so, alright, line number four. Possession goes to the buyer at the time of closing. Not before. Let me that's simple enough. Number five, this is similar to the a to B contract. A, the B had something similar and as far as proliferations, it's talking about the taxes and rents and such as that. It's pro-rated. Again, meaning depending on what time of the year the closing occurs. Let's say it's in the middle of the year. You will the buyer will have to pay taxes from that point forward. And the same with the RIM, they're gonna get the rent from that point forward. That's what the progression is occurring, is referring to. Number six. This says the seller is delivering delivering the premises at time of closing an as-is condition. So there's no confusion that thereby in some house in anything other than as is conditioned. This line coverage there. It's number seven says it's the properties being sold subject to zoning, ordinances and regulations. This basically means, you know, if there's any kind of if the property is zoned, like for commercial or residential or any specific type of zoning. The purchase of the property is, according That zoning that is already in place. Sometimes there can be some confusion like if the property is right next to a piece of commercial property of whether it's residential or commercial or whatever. But basically this covers you saying that however it zoned is how you're buying it. Nothing more, nothing less. Number eight here says that this is another one that covers you. I'm just going to read this one in its entirety. It says the seller agrees to deliver a good and marketable title or insurable owners title to the property above described, free and clear of all encumbrances except here in set forth. Now here's the next sentence. If title proves to be not good and marketable or insurable, the seller is to make the title Good and marketable, orange sharable and has an shall have reasonable time to do so. This is covering the the it is covering the buyer and let them know that the property that they're buying and investing their time and money in, you're going to be able to actually bring clear title to them at the point that the closing occurs. Now, it might sound like this is a little bit of a liability, but it's actually not because in the addendum on the previous page, it ties into this piece and I'll I'll expand on this when we get to the next page. Number nine, here's is referring to the earnest money deposit. This says the deposit is held in escrow pending closing. It's agree that in the event of default or failure on the part of the purchaser to comply with the terms and conditions of this contract, said deposit is to be paid to the seller as liquidated damages. This says that the deposit that the buyer is giving you are or basically sending two escrow, like in this top part that we talked about. If the closing falls apart because the buyer does something weird, whatever it is, or if they changed their mind, that earnest money goes to you. That is a non-refundable earnest money deposit. When they put that earnest money deposit and that house is either closing or you get the earnest money deposit. The only exception to that. Well, let me say one of the few exceptions to that would be if for some reason you cannot provide marketable title to that property. So if if you run tidal and there is some kind of problem or lane or whatever, if something on the title prevents you from closing on the property, then that earns money, will go back to the buyer. Otherwise, you collect the earnest money deposit. That's what that line is referring to, and that's number nine. Number ten says that the parties agree that this written contract and the attached addendum expresses the entire agreement between the parties and there is no other Agreement. A modifying the terms here under this contract shall be binding on both parties. Their principles airs personal representatives or assigns. This line says that the only agreement that you have between you and the buyer is this contract and any attached addendum that is pertaining to this contract. You know, sometimes people, you know, in the middle of negotiation or whatever, you know, they sometimes something is mentioned or verbally when you're communicating with each other prior to the transfer of title. If something isn't in writing in this contract, then it's kind of out the window and that's basically what this line is referring to. If it's not on this contract in writing, it's not something that both of you agreed to mutually. Then poof, it's out the window. Alright. Number 11 here says the underside, jointly and severally agree to purchase and sell the abrupt above described property on the terms and conditions stated in the foregoing instrument and attached to denim, they must be attached and include it as part of the contract. That is, you know, a lot of words saying that the buyer agrees to buy and you agree to sell. That's basically what the headline is referring to you. And then beneath that, all we have is the purchasers name, their signature, their email, and their phone number. So that's where the buyer would put all their information on this document. And then you would simply sign here in the cellar blank and also date it. That is the first page of the sell side, purchase and sale agreement. So now what we're moving onto is the second page. And what the second page is is an addendum. 3. "Sell-Side" Purchase & Sale Agreement | PART 2: And what an addendum does is it basically just, it's an add on. It just gives a little bit more detail. So now let's blast through this addendum here. And basically this addendum kind of is what protects you a little bit more and gives you a little bit of an edge. And there's some, there's some particular, particularly strategic verbage in here that I'm going to point out. Alright? First it says there's no financing contingency. That means that the buyer is paying cash, is paying cash, is paying cash. You know, they're not going to go to this contract and then try to go get a bank loan or financing or whatever they're paying cash for this house. And you know, whether the deal doesn't come together because they're not able to get their money together or whatever. We're not giving them any reason to get off the hook because they're financing fell through or something like that. So that's what number one is. No financing contingency. If they're used. If number two is if using Financing, basically, if you do grant them to use financing, a pre-approval letter is required upon acceptance. Occasionally, you may give somebody the option of using financing to close one of your real estate deals. It just happens. I mean, you know, I'd say 75% of the houses I close or cash, maybe 25% or less, might have some financing involved just the way it is. But this line says, if they are using Financing, they're going to provide you with a pre-approval letter. So what that means is if they have a pre-approval letter, they are basically ready to go. They have a lender in place that has already vouching for them in the transaction. They're approved for the purchase. And there shouldn't be any other reason for the deal to fall apart because they're financing doesn't come through. So that's what number twos talking about. Number three, the contract is subject to the seller's ability to convey marketable title. This is an important one for you. What this says is that if you go to contract with a seller and you go to contract with a buyer, and you're bringing the deal together in the middle. But for some reason you cannot get tidal pool that's free and clear and there might be a lien on it. There might be something weird going on with a problem with the deed or something like that. But if something like that happens, it can put you in a vulnerable place because you got the seller wants to sell, you got the barrel and Dubai and the near here in the middle and you can't bring marketable title. What's up with that? This is the line that is going to protect you and basically get you out of this contract if marketable tidal cannot be produced. So don't worry, if you can't produce marketable title. If you can't produce it, you know it, it kinda, kinda sucks because the deal is going to fall apart, but at least you're not liable and on the hook, legally because you couldn't produce marketable title. Alright. Number four. Says the buyer expressly waves the remedy of specific performance in the event that the seller is unable to convey marketable title. First, let me define this. Specific performance is basically when a seller is forced to sell their property legally because they agreed to on a contract. And there's no excuses, you know, you are going to sell your house because you agree to that's what specific performances and what this line says is, basically if you can't produce marketable title, the buyer can't force you to sell the house. That's what the line means. Okay. Number five. This one's a little, little tricky. Let me explain. It says the buyer waves the right to record a Lives pendants against the property or any other public recording that if invoked, would prevent the seller from conveying the property to a third party buyer. Alright, let me, let me pick this apart first. I think the most important thing in here is a Lives pendants against the property. Okay. Here's what she don't want to have happen. You go to contract with a seller and you go to contract with the buyer. What the buyer can do is they can record a document with the county that says, hey, I'm been clarity agreed to sell his house to me. And, you know, if he doesn't sell it to me, then it's not going to be able to be sold to anybody else. That's what lives pendants is. It basically locks a seller into an agreement with a buyer. Here's why that's troublesome. Let's say you've got the contract with the salary, you got the contract with the buyer. Let's say the buyer records a Lives pendants and now you're stuck selling to that buyer. But then the buyer, he disappears or whatever, he doesn't close. Now you've got a problem because you gotta contract with a seller and you gotta house that needs to be sold. But because he recorded lives pendants with the county, you're stuck. You can't sell the house because there's a cloud on the title. That is what you want to prevent happening by this line. And, you know, it's kind of a rare thing for somebody to record lives pendant zone, distressed residential real estate. But it does happen. So this line prevents any possibility of that happening and just ensures you're going to have a smooth closing. At least, you know, it wouldn't run into trouble because it lives pendants. It hasn't been recorded. Excuse me. Alright, moving on and let's see, number six. The seller reserves the right to continue to offer the property for sale and tail until this offers has been formally accepted, earnest money deposit received and without any purchaser added contingencies. What this means is when you have the, when you have a contract with your, your seller, you're going to be marketing that property. You're going to be telling you no buyers about it. You might put an ad on Craigslist, you might email blast and whatever you do, you're marketing that thing. This line says that. You know, a buyer might sign your contract. You're you're B2C contract with you. But until you get a contract, that is that it doesn't have any added contingencies by that buyer. And your earnest money is showing up in your closers escrow account that offers not accepted and you can keep offering that property. What this line does, it kind of keeps you from getting stuck. And you take the, you take all your advertising down. And then, and then your buyers still hasn't sent in their earnest money deposit or you're still waiting on a contract to come in and it doesn't have to have a bunch of handwritten weird stuff on it. That's what this line is due and it just lets you keep marketing the property. It's still on the market until you get a clean contract and you get a confirmed earnest money deposit. That's what this line does. Number seven says. The exact figures from property taxes may be unknown at this time, but there still may be no adjustments made between seller, purchaser after the closing as taken place, taxes and things like that. It's a little bit of a moving target. The your closing you're closer, can look up the current taxes owed whenever they run on title, but still it's it's usually not down to the penny. It's kind of, you know, it can be within a few dollars, at least something like that. But this line just says, hey, you know, we're gonna have an estimated amount for the property taxes owed if we're off a little bit to bed. That's what that line it says. Okay. Now number eight, this is Qi. This number eight is what makes Let me say. Yeah, I'm sorry. Just confirming. Yeah, number eight is what makes this whole thing work with the simultaneous closing or a back-to-back closing. That's the same thing. Here, guys, I'm gonna read it. It says in the event that the seller has the property under an executed contract to purchase, that's referring to your ADB contract, the seller may choose to acquire the property in a simultaneous transaction with the current owner by using the buyers funds to purchase the property. Okay. Next, it says all the seller's obligations under this agreement are contingent on the acquisition of the property from the current owner. Honor, before the closing date. Two things. The first thing says that you can actually use the be to see buyer's money to fund your purchase on the a to be closing. Okay. This lets you close the transaction without having to bring any of your money into the closing or having to use Transactional funny, which? Transactional funding? Which cost you money? It lets you use you're in buyer's money to close your a to B transaction. That's what this line does. But without it written somewhere where you're in, buyer agrees to it. It's actually, you know, depending on how how litigious your market is and your closers and such as that. You definitely want to have something like this in your contracts. So this first part says you can use your ADB buyers money. I'm sorry. I'm sorry. Re-do. The first part says you can use your beta c buyers money to close your a to B transaction, okay? So what happens is their money will go over, close the ADB transaction, and then they will close on you and the B2C transaction. But the thing is, it's not like this happens one day and then this happens the other day. It all kinds of kind of happens at the same time you're closing attorney kinda makes that magic happen for you. Okay. Now let me get this next bit. And this part is important. Ticket says, all of the seller's obligations under this agreement are contingent on the acquisition of the property from the current owner. Okay. Here's what happens. You basically your a to B contract, your buy-side has to close in order for your baby to see contract to close as well. I mean, that makes sense. This has to happen first in order for this to happen. But what can happen, let's say worst-case scenario. Let's say you're a to b doesn't close. Let's say the seller just ditches you. They don't show up for closing. They go off the radar. Radio silence. What the heck? Now you're gonna have your buyer over here and you're B2C closing, they're going to be ticked off what the heck is going on. I thought we were selling this house to me. You know, where you add I'm here at the closing, you know, that kind of thing. That can be bad and you can't be on the hook for selling that house to this buyer, but you can't sell it because the seller won't sell it to you. Hope that makes sense. It doesn't my head. This line here says that basically if the a to B doesn't close, the B2C don't close and you are not obligated to sell if the a to B doesn't close. I hope that makes sense. I gotta move on. If you have any questions about this little bit, just fire off a message to me and I can clarify it for you. Alright. Nine says, by signing this agreement, you completely understand what you're signing and you have the full authority to sign it. Number ten says, if there's a conflict between the addendum and the contract, the turns of the addendum take precedence. Okay? So basically again, you know, you've got these two pagers, you've got the main contract is the first page. And you have the second page here, which is the addendum. And what this says that if there's some kind of conflict, the den, the addendum actually overrides the original contract. That's what it means. So I'm trying to come up with an example. I mean, just if for some reason the purchase price and the original contract was 50 thousand, but the addendum said the purchase contract was purchase price was 46. The den dome is what would actually be the deciding factor. The addendum overrides the original contract is what this line says. Don't get too bogged down by it, but that's all that line means. Ok. The last line here says the closing of this transaction, so constitute as acknowledgment by the buyers that the premises were accepted without representation or warranty of any kind or nature and as present as is condition that says that when when the buyer signs these blanks in this thing, they are accepting the contract and they are accepting the house in its current condition as it sits where it says, you know, with no guarantee your warranty or anything like that. It's basically here's the house. Do you accept it as it is? Yes, I do. And they sign the sign the addendum and the contract. That's what number 11 says, and that's it. And then the only thing left is the purchaser signatures. So your buyer for the B2C transaction is who signs this contract in both places. They sign up here for the purchaser in the first page, and they sign down here for the purchaser in the second page, which is the addendum. Whoo. Okay. So that covers the sell side. Purchase and sale agreement, also known as the contract that you would use on the B to C closing within a simultaneous closing or a back-to-back closing. Those those two terms are interchangeable, simultaneous closing, back-to-back closing. Alright? I hope that gives good detail about all of these terms and conditions. Again, if there's any questions or anything that I can clarify on, just leave me a message or get in touch and I'm happy to give more detail or clarify in any way that I can't. Alright. With that said, we're going to move on to the next form in the course. 4. Class Project: Okay, so now that you understand how the contract works, it's time to work on your class project, which basically means going through the contract and seeing if you want to make any potential changes to it that may basically improve or enhance the contract. So what you wanna do is download the files to your computer. You have both a word or an OpenOffice version, which is the editable version and also a PDF. So take the editable version and go through the contract line by line. And you want to consider making changes to things like, you know, kind of formatting things like fonts and margins and things like that. And also go through all of the terminology and be sure that everything is clear and would make good sense to both you and anybody who would be potentially signing the contract. And also maybe considered things like if you want to add a header or a footer, or a logo or a watermark, just things like that. You want to, you want to consider making this your own. Now, I want to I want to say that it is not mandatory that you make changes. I use these contracts exactly the way they are, but you may want to make some changes to make them more user-friendly and just make them your own. And that's what this class project is about. So once you've been through them and you approve of the way they are and you've made a potential changes, you want to export it again as a new version of the PDF. The PDF is basically your working copy. That's your general use copy hits the one that you would potentially print off or e sine or email to somebody. Again, the PDF is basically your work in copy and the other version is the one that you would potentially make any edits to. So once you have it, you know, any edits made and you have that final version that marks the completion of both this course and also your class project. Now the one other thing I want to say is regardless if you make any edits to the contract or not before you put them to use in your own business and your own market. I always advise that you have it approved by either your title company or your closing attorney. That kind of thing varies state to state, but have it approved before you put it to use. It can potentially save you some time and hassle. So that is always a very, very good idea. So with that said, that marks the end of this course. So Ben clarity, signing off and wishing you the very best and you were real estate investing endeavors.