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Contract drafting is a paralyzing fear in real estate investing for investors buying or selling property. The usual assumption is that if the investor misses something very important, the deal will be lost, they may be liable for large sums of money if the deal doesn’t work out, or they are doing something illegal and don’t even know it.

Overcoming these fears is easy to achieve but must be worked on in order of importance to the investor, which can be done in minutes or hours. The result will be a long and rewarding career in real estate investing. The following are ways to help overcome these lingering fears for real estate investors.

1. The fear of omitting something very important in the contract.

Real estate contracting is as old as writing and each state has set some standards or the real estate agents in that state have set contract standards that they use to write purchase and sale agreements.

An investor can hire online, at a local office store or even from a real estate investing guru. It is strongly recommended that you use only contracts approved by your state BAR (bar association) or your local BOR (Board of Realtors). In general, using store-bought or guru contracts won’t expose you to too much liability, but you may have major issues that aren’t obvious until you lose a large amount.

In particular, guru contracts are sold to protect the investor and often have separate buy and sell contracts. If these contracts are sent to the seller’s attorney for review, they could lose their deal because they are too onerous. It is better that you check the contract that is standard in your state using clauses or annexes that favor your position.

2. The fear of enormous liability if the contract is made improperly.

Unless otherwise stated in the contract, when you are a buyer, your liability is limited to the amount of your deposit. If you haven’t made a deposit yet, your contract may not be valid in the first place, so always provide the minimum deposit the seller will accept. While it’s awesome for other investors to give $1 or $10, if you’re competing with another investor offering $100, you could lose the deal.

Always include a rider that your security deposit is not due until the inspection period is over and ask for as long an inspection period as possible – with homeowners, I ask and receive 20-30 days. This longer inspection period gives me more time to sell the property. You may not be able to use your buyers’ funds to close if you are getting a conventional loan to purchase the property; this is illegal if the shutdown is not successful. There are several ways to close the transaction using funds from a cash buyer.

If you are selling a property, your liability is broader because you may face a lawsuit called a “Breach of Contract.” This lawsuit claims that the buyer had a valid contract with you and for whatever reason; you decided not to sell it to him. The easiest way to overcome this potential problem is to have your contract reviewed by a lawyer and have clauses that protect the closing date, such as that the buyer will have to close on or before a specific date.” If the buyer does not do so, you you have a breach of contract by the buyer, but your remedy is up to the limit of your deposit, unless you incur an additional financial loss on the transaction that did not close Always get as large a deposit as possible from a buyer , usually at least 3% to 5% or a minimum of $2,000.

3. The fear of doing something illegal and not knowing it.

This can be a well-founded fear for newbies. It is best resolved by having a lawyer, not another investor, review what he is doing. The benefit to the lawyer is that you will put him in as closing agent. He will likely write the contract for you, but this can be a burden if you are meeting with a buyer or seller and want to close the deal. Always use an attorney who does real estate closings as their primary business, not a general practitioner. You’ll find that while each agreement varies slightly, the actual number of contract clauses that vary from contract to contract is very small.

In short, your ability to write purchase and sale agreements is very powerful and you must master it. This first requires that you read and understand a standard contract for your state and local municipalities if those are also required. You do not need a real estate agent to write a contract and it is not illegal for you to write a contract despite what many real estate agents tell you. Always have a lawyer review what he is doing and pay him by making him the closing agent if possible. If the party opposing the contract chooses the closing agent, ask them to follow through on the deal and explain that you will use it in the next contract where you control the choice of closing agent.

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