Contract Issues for Investors

What to look for

Contract Issues for Investors

PURCHASE CONTRACT

  1. UNDERSTAND IT – THIS IS WHAT GOVERNS THE DEAL
  2. Deposit – grounds for release
  3. Default – rights under the contract if someone doesn’t do what they are supposed to do
  4. Closing costs – Deed prep, addressing judgments, Grantor’s tax
  5. Commissions/Referral fee  -ARE YOU A REALTOR???

 

        1.            if there are no commissions or referrals then state it

  1. Inspections – time frames are VERY important
  2. Termite Inspection
  3. Tax Proration – Account for it (for both of you)
  4. Don’t get cute

ASSIGNMENT CONTRACT

  1. UNDERSTAND EACH PART OF THE TRANSACTION
  2. If you are the Assignor:

        You want to be on the settlement statement and have the right to see the settlement statement – if you don’t get that authorization ahead of time you are at the mercy of your Assignee

  1. If you are the Assignee and there is confidential information on the HUD you may want to make sure that the Assignor understands he will only get a redacted settlement statement
  2. Understand that the original contract controls the closing

        1.            The Purchase price is not going to change on the Deed or the settlement statement because you have recited a new “purchase” price in your assignment.  When you recite a new purchase price you are setting up a situation where the ultimate buyer is going to 1) expect to see that purchase price on the settlement statement and 2) is going to have a Deed that reflects a lower purchase price. If you really think that this could cost you the deal then take title.

        2.            The assignee must read the original contract carefully because they are bound to it.

  1. Is there a financing contingency?
  2. Are you stuck paying all closing costs? Factors into your margin.
  3. Are their delinquent taxes/judgments?
  4. Is Time of the Essence?

                D.            What happens if the guy I assigned it to walks?

                                You are stuck with buying and left with whatever rights you reserved in your default provision of the assignment contract. ATTORNEYS FEES ATTORNEYS FEES ATTORNEYS FEES EXPERT FEES

                E.            What happens if the Seller walks?

                                Assignee can request specific performance. Assignor could request specific performance if Assignee doesn’t want to mess with it. If the Assignment is worded right the Assignor COULD keep any deposit and potentially sue for the assignment fee. LOOK AT YOUR CONTRACT.

 

PROMISSORY NOTE AND DEED OF TRUST

  1. OH MY GOD WHAT HAVE  I AGREED TO DO?
  2. Compute your terms on paper with an expected closing date.

            1.         Get familiar with the settlement statement program and map out your costs

                        a.         Recording charges – NOT ON THE PURCHASE PRICE BUT THE ASSESSED VALUE (or whichever is higher)

                        http://webdev.courts.state.va.us/cgi-bin/DJIT/ef_djs_ccdeed_calc.cgi

                                    b.         Taxes – NOT ON THE PURCHASE PRICE BUT THE ASSESSED VALUE

                        https://www.hanovercounty.org/default.htm

                        http://www.co.henrico.va.us/finance/disclaimer/

                        http://www.chesterfield.gov/eServices/RealEstateAssessments/RealEstate.aspx

                        http://eservices.ci.richmond.va.us/applications/PropertySearch/

                        c.             Attorney’s Fees/Wire Fees/Cover Sheets/Run down/Draws

                        d.            prepaid Interest

                        e.            Guaranty?