Real Estate Investing with Brian Evans Jr.
"Paperwork Can Make or Break Your Deal"
As a real estate investor, there is a lot of paperwork that you will need to fill out for each deal. Some of the paperwork can be very scary for a seller. It is your job to make sure everything is explained in a way that makes the seller feel completely comfortable.
The Purchase and Sale Agreement is your most power tool. There is a bunch of other paperwork I use for my deals too, but honestly, give me a good old-fashioned Purchase and Sale Agreement above anything else, because that's all you need. Anything else can be created with an addendum, but you have to have a Purchase and Sale Agreement when you buy.
I'm going to talk about language and stuff. What I don’t like to do is I don’t like to call it a contract. I don’t even like to call it a Purchase and Sale Agreement when I'm talking to a seller. I simply tell them“This is a piece of paper, Mr. Seller, that says that I'm buying it and you're selling it. That's what this contract is. It’s not a contract. This is a piece of paper that says that I'm buying it and you're selling it.” That's what this is, because when you start using language that scares people, you're going to kill a deal.
When you start throwing around terms like contract and deed and CYA, and all these others, it’s over their head. All they want to do is sell their home. You've got to be careful not to say anything that's going to prevent that sale. So the fact that you know more than they do, that could be a detriment, but now you're going to know that the way you say it is very important. So again, simple state “This is a piece of paper that says that I'm buying your home and you're selling it,” and then we go through it. So keep it simple.
The Purchase and Sale Agreement that I use is the same when I buy and when I sell. You'll find a lot of people who have different Purchase and Sale Agreements and they try to get all creative and sneak a little bit of extra bucks here and there, so what. Give me a Purchase and Sale Agreement that I know inside and out, forward and backward, and I'm going to use it for any type of deal. Option, wholesaling, lease option, seller financing, short sale, everything is always on this document, and if you need to add something to it you can always just handwrite it in.
A handwritten word is much more powerful than a typed word. You can always cross out. Everything should be handwritten, just handwrite it. Don’t worry about even typing it. You don’t need to bring your computer and type out a contract with the seller. Keep it simple, handwrite it. Pen and ink goes a long way.
This paper is nothing more than a meeting of the minds between two parties. What’s the verbal agreement that we just talked about? Let’s get that verbal agreement in writing, on paper, before either one of you changes your mind. That's what it is, so if you let time go by, let them think about it or you think about it, like you think it’s a deal, but you're afraid to get the commitment right then and there, and a day or two goes by and now you're ready, but the deal’s gone because they probably have changed their mind.
Get it in writing immediately, immediately. Worst case scenario, then you are at loss of your earnest money deposit, and if you didn’t write a big earnest money deposit check; and in fact, I wouldn't write any checks to anybody because they can get it at closing, as far as I'm concerned, then that's all you are at risk if you decide not to buy. Get it in writing immediately. Don’t let this fool you. This is just pen and ink.
A Purchase and Sale Agreement could be a piece of paper that you handwrite and say: “I'll buy your house for X. You'll sell your house for X. We’ll close on this date, hopefully. It is contingent upon you doing this. Sign and date.” That could be a Purchase and Sale Agreement. It’s a meeting of the minds. Don’t complicate it. All this other legal jargon is exactly what it is. It’s important stuff, and you're supposed to lay it out, but most people only buy or sell one or two homes in their life, so this is scary to them. When you start throwing out terms like contract and deed and closing and attorney, it’s scary, so you need to make it less scary.
Everything should be in writing so there’s no confusion. Don’t ever leave anything up to chance. You should be able to give this contract to any third party, and that third party should be able to understand what’s going on and how it will close. What are the terms? Are you taking over subject to? Don’t leave anything up to guess. It needs to be plain as day. In fact, don’t even hesitate to write it down more than once. Even if it’s explained in another section, you should also write it as an addendum or on the back page.
Again, just remember to keep everything as simple as possible when it comes to dealing with the paperwork. A lot of sellers you come across are already in a difficult spot and the more comfortable they feel with you, the greater your chances are to seal the deal!