what's going on everybody welcome to
ryan pines show where we talk all things
money
real estate and entrepreneurship and for
today's episode
i am going to be explaining the question
that i probably get more than any
and that is how do i fill out a real
estate contract
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all right so in this video i am going to
cover everything
line by line what it means how to fill
it out
so that there are no more questions
about this but before we do that do me a
big favor make sure you go and hit the
like button so this video can get more
exposure
and more people can understand how to do
this now a couple of things before we
jump into the contract
number one you actually need a contract
right we need to be looking at the same
exact contract so
we're gonna use the same exact contract
that i use and i'm going to give it to
you guys completely for free
all you have to do is go to
futureflipper.com it's in the link below
you can download it it's a very simple
contract and that is what we are going
to be using
in this demonstration so i'll give you a
second to download it before we go over
this video
did you do it the other thing to know is
different states are going to require
different types of contracts
this contract will work in most states
but some may require you to tweak it a
little bit
that's why i'm giving you the word
document so that you can change it so
what i would say is
if your state title company or attorney
does not allow you to use this contract
ask them what part they want changed and
then you can easily change it and if you
caught what i just mentioned i said
title companies or attorneys
in the states i invest in like nevada
california arizona
we are a title company in escrow state
everything is done
at the title company but some states
like new york where i've bought at
everything was done through an attorney
the process is almost the exact same but
just know that different states function
in different ways
and they talk a little bit different
lingo but it means the same thing
okay so let's go through the contract
line by line so that you guys know
exactly what i'm talking about
okay so when you go to my website i'm
gonna give you three different contracts
the first one is the residential real
estate purchase and sale agreement
the second one is the addendum to that
agreement
and the third one is the assignment
agreement so the residential real estate
purchase agreement is the first contract
that you need to get signed by you
and the seller the addendum to that is
if you guys make any changes
down the road to the contract and the
assignment agreement is if you are going
to wholesale the deal to someone else
it all makes sense as we go through this
video so let's jump into the most
important one which is the
real estate residential purchase and
sale agreement a lot of people commonly
just call this the
rpa residential purchase agreement so if
you see me refer to it like that
that's why okay so as you guys can see
there
is four pages to this agreement um some
of you might only need three and i'll
get to that when we get to the last page
but
this is the purchase and sale agreement
so let's go through it line by line this
purchase and sale agreement is entered
by and between
blank the seller so you're gonna put the
seller's name there and blank
the buyer so that's where you're gonna
put your name or your llc
a lot of people ask me do you need an
llc you don't
eventually you should if you start doing
deals but starting out you don't
buyer and sellers shall jointly be
referred to as the parties which is
legal
a lot of this by the way guys is a legal
jargon as well so i might gloss over it
because it doesn't really mean a ton
description of the property so this is
where you're gonna put the address where
you're gonna put the city state and zip
the apn is the parcel number you guys
might have it called something else in
your state so that could be adjusted
property is sold in as is condition
obviously most of the stuff we buy is
as-is condition that's why we're getting
a good deal
we have it bold and big so that the
seller knows that we are buying it as
is and it makes them feel better
property includes all fixtures windows
and floor coverings built-in appliances
draperies
hardware shades blinds win i'm not going
to read the rest of it basically it's
saying
anything left in the home becomes hours
when we buy it and we always tell our
sellers you can leave whatever you want
just know that it becomes ours next
thing the purchase price
the seller shall convey the property to
the buyer for the sum of blank so right
here you're going to write the purchase
price in letters so if it's 200 000
you're gonna spell it out
two hundred thousand and then right here
you're gonna write it numerically
so you're gonna just put it 200 000 in
numbers
seller acknowledges this price may not
represent fair market value for the
property
we are telling them that we are getting
a deal on this we don't do this for free
we're trying to make money
closing costs and taxes okay so for us
we always say we're going to pay them
all but we leave it blank here just in
case you guys negotiate it differently
so all closing cost title fees are to be
paid by
typically for us it's going to be the
buyer but sometimes you might be able to
work it so the seller pays them transfer
taxes to be paid by
you're going to choose or seller we
always pay it property tax sewer trash
hoa fees sid
lids or other assessments will be
prorated at the close of escrow sellers
shall pay
all liens recorded against the property
at the close of escrow so
this means anything that the seller owes
as far as taxes
trash sewer all this stuff it gets
pro-rated which means
to the day of close so let's say we
close in the middle of the month march
15th whatever
they are going to pay taxes and all of
those things up to march 15th only
so if they owe a bunch of money they're
gonna have to pay all that current
that's their responsibility it gets
taken out of their net maybe they
pre-paid their taxes sometimes we see
that with sellers so maybe they've paid
it all the way to july
well they're actually gonna get a credit
from march 15th to july
and they'll get that money back
proration just means that you're gonna
pay it only to that date so assuming
everything looks good on the first page
if you guys are in agreement buyer which
is you are going to initial here i only
have one signing block because it's
usually just me or my company and then
the seller we have two signing blocks so
if it's a husband and a wife or whatever
the case is if there are more than two
sellers you could simply just add a line
here okay next part page two
the due diligence buyers shall have a
period of blank calendar days from the
date that this agreement is fully signed
to complete its due diligence sellers
shall ensure that the buyer's
representatives have reasonable access
to the property
during this period seller to disclose
any conditions that adversely affect the
property value
okay let's start with that first part
okay this is your period to get your
inspections to go see if you have a
buyer if you're trying to wholesale it
typically we will put anywhere from 7 to
14 days
if i already know i'm gonna buy it
sometimes i'll just put zero days
because i know for a fact i've got a
home run deal
i don't need to do any inspections but
for you put at least 10 days so that you
have time to figure out if you're gonna
do this deal or not okay second half of
that any time before the due diligence
period expires
buyer may terminate this agreement by
written notice of cancellation to the
seller
and escrow company escrow company shall
refund the earnest money deposit to the
buyer
without the seller's consent if within
the due diligence period
basically this is saying we can back out
during the due diligence period and get
our earnest money deposit back
earnest money is at the bottom of this
so we'll talk a little bit about that in
a second but just know that
you can back out during the due
diligence all right part five of this
escrow title and escrow company shall be
the buyer's choice so you guys can pick
wherever it is
it's your choice close of escrow shall
be on or before blank so you're going to
pick the date of close typically we
always do 30 days out
we can close before that if we want it's
on or before that date
section six this is what we were just
talking about with the earnest money
deposit
within five business days after this
agreement has been signed by the buyer
seller buyers shall partially perform by
delivering an earnest money deposit of
blank to escrow for the benefit of the
seller
so within five days of getting this sign
you need to put your earnest money
deposit down with the title company this
amount can be whatever you guys agree to
i've said it could be as low as ten
dollars
i've seen a hundred five hundred a
thousand i've done five thousand ten
thousand it can be anything but make
sure you have enough to actually put
down the bigger the earnest money
deposit you put down the more you're at
risk of losing the money so make sure if
you are gonna put a significant amount
down that you're for sure gonna buy the
property
as you can see here the earnest money
shall be non-refundable to buyer
unless buyer is unable to insure title
to the property so maybe the title
company's not willing to insure it
because
there could be a lot of reasons why they
wouldn't insure it seller is unable to
deliver clear title to the buyer this is
part of the reason why they wouldn't
insure it because they can't guarantee
clear title
they kind of mean the same thing seller
fails to execute all documents necessary
to timely close escrow on the sale of
the property so maybe the seller becomes
uncooperative and won't sign paperwork
that happens sometimes
or buyer issues timely notice of
cancellation under section 4 above
so we canceled during the due diligence
period those are the only ways we would
get our earnest money deposit back if
the seller's uncooperative
if we can't get clear title or if we
canceled during due diligence
if any of those don't apply you can lose
your earnest money deposit so remember
that
this provision shall be construed as
consent by the seller
and an instruction to escrow to return
the earnest money deposit to the buyer
in the event
of the conditions listed in the
proceeding paragraph so basically it's
saying if any of those apply we get
earnest money deposit back all right
section seven
tenants if one or more tenants occupy
the property
then any rental income will be prorated
at the close of escrow
so same thing as the taxes and insurance
from before you get it pro rated so you
would get
rent from say march 15th all the way to
march 31st
if they've already paid a full month
sellers shall provide all leases to the
buyer before close of escrow that's
self-explanatory you should have the
lease
seller to provide all security deposits
cleaning deposits keys and other tenant
deposits to the buyer before the close
of escrow
so make sure if you're buying a property
with tenants that you get all those
deposits because now you're responsible
for giving it back to the tenant when
you get them out of there or whatever
happens
if everything looks good you guys would
initial down here again all right so
this is the last page of the rpa
additional terms this is where you guys
would write anything
else that you agree upon a very common
one that we do
is a seller rent back so maybe the
seller says hey
i'm willing to do your deal but i need
to rent back for two weeks after the
close of escrow
so that means you're gonna buy it they
still have two weeks in the property
to get their stuff moved and get on to
their next place so we would write that
in here that seller to rent back for two
weeks
after the close of escrow but a lot of
times what we'll do in that situation is
we will make the title company hold
money back
we'll say title company to hold back
five thousand dollars five thousand
dollars to be released to the seller
upon vacating within two weeks so if
they don't vacate within two weeks that
five thousand dollars
now legally should go to us does it
always happen that way
no anytime there's money in escrow
there's usually a fight for it so any
additional terms will be in this section
that you guys come up with
all right here's some miscellaneous
stuff neither buyer nor seller are
represented by a licensed real estate
agent no commissions are due or payable
in connection with this transaction
i don't care if you are a licensed agent
or if the seller's a licensed agent
there is no brokerages involved in this
deal it's just buyer
and seller we're making that very clear
buyer may assign its rights under this
agreement
so that means that you have the ability
to assign the contract to someone else
and make a wholesale fee
seller is aware that buyers purchasing
the property to make a profit and may or
may not market the property for sale or
lease
including on the mls so this gives us
the ability to go and market the
property for sale even though we don't
own it
and legally we could do it on the mls in
our state if we so choose
we don't do it often because sellers
might get really mad about it but we
have the legal right to do it
make sure you check your state's local
laws if you're able to actually utilize
this clause four in the event of a
dispute concerning the interpretation
or the enforcement of this agreement the
prevailing party shall recover
reasonable attorneys fees and costs
though if there's a dispute
it's going to the attorneys that's
nothing new five this offer expires at 9
pm pacific standard time on blank so
this would just be the date that you put
this offer expires
a lot of times we do this to put
pressure and to show scarcity that hey
this offer doesn't last forever you're
gonna do this or not and then boom
if everyone agrees both the sellers
would sign here
you as the buyer would sign here you
guys would date it this is it for the
rpa
that's it just simple three pages covers
everyone's parties
everything is very much defined and this
is the exact same contract that i
personally use
right now this last page is optional i'm
not saying that you guys need to use it
this is the disclosure and confirmation
of no agency relationship
so you're going to put the property
address here and essentially i'm not
going to read all of that
essentially this is just saying that no
realtors are involved in this once again
i don't represent the seller the seller
doesn't represent me
i am not looking out for the seller's
best interest you definitely want to use
this if you're a realtor
you want to be very clear with the
seller i don't represent you i don't
even represent me
i'm just a buyer trying to buy your home
there is no realtors involved
and the reason i had this form made was
because i own a real estate brokerage
and i want to be very clear that
we do not represent them we are
investors trying to buy a deal you don't
have to do this one but get it done if
you want all right now let's go on to
the addendum agreement okay so this page
is super simple this is the addendum
to the residential purchase agreement
right here you're going to put addendum
number
so if this is the first change you guys
are making of the contract it would be
addendum number one but you can have
contracts that have multiple addendums
so you could be on addendum three
four five depending on how many changes
you guys make throughout the process
same deal you're just gonna put the
buyer which is you you're gonna put the
seller which is them
you're gonna put the date of the
contract and you're gonna put the real
property located at
that address now this is where you're
gonna put the amendment okay
maybe if you're doing a price reduction
you're gonna say the purchase price
shall now be
a hundred thousand maybe before it was a
hundred ten this is a common addendum
when you go and inspect it and you see
that oh man it's in worse shape i need a
new price or maybe you're not ready to
close on time so you need to
change the close of escrow date there's
a lot of things that you can use this
addendum for but anytime you're making a
change to the original contract
use this addendum all you have to do is
just have both sellers sign
on this one we just have three seller
blocks just because we have room for it
you may need it then you put your buyer
signature right there
let's go on to the assignment agreement
okay so the assignment is strictly only
if you are going to wholesale it to
someone else
if you're going to buy it yourself you
don't need this now here's how the
assignment agreement works
you were going to find the buyer and
maybe you know that the buyer's willing
to pay
20 grand more than what you have it
under contract for so your assignment
fee is going to be 20 grand
so let's just use this as an example as
we go through it but the assignor is
going to be
you you the buyer are assigning it to
the assignee
the assignee is the person who is going
to be the end buyer
now you're gonna put the total purchase
price so you're not gonna put your
wholesale fee
let's just say that you have the
property under contract for a hundred
thousand
and you know your buyer's gonna buy it
for 120 000
so in this section you're going to put
120
000 and you're gonna spell it out in
letters then right here
you're gonna put it numerically 120 000
the undersigned assigner does hereby
assign to the assignee all the rights
everything to the property located at
blank so you're gonna put the address
now
your assignee needs to have an earnest
money deposit remember when you put your
earnest money deposit down
they need to put one down typically we
always ask for five thousand dollars
non-refundable so that we know that the
assignee is ready to buy this property
so typically right here you'll put five
thousand dollars as an earnest money
deposit
if the earnest money deposit is not
received by blank so you're gonna put
the expiration date let's say you're
doing it tomorrow you must deposit five
thousand dollars
by tomorrow then this agreement is void
so this prevents anyone from tying it up
but not taking action they need to put
their earnest money deposit
by a certain date and time assignee
close of escrow date is on blank
so for me i always like to set our close
of escrow date before
the rpa's close of escrow date because
if they don't close by that date
i still want to be able to close for the
seller and have a backup buyer
or maybe i buy it i don't want to have
those two dates be the same because if
there's a problem they don't close
then we're screwed we might lose our
earnest money deposit on the rpa
so that's why we put this date
supersedes the close of escrow date on
the residential purchase agreement
so that they need to close by that date
it doesn't matter what the rpa says
this is the date they must close by
assignee shall pay all escrow fees
i'm not going to read the whole thing
but they're pretty much paying all the
fees now you're not paying it anymore
then the assignee default clause if
assignee does not fund on the assignee
close of escrow date the assignment of
the residential purchase and sale
agreement is void
so if they don't close it on the date
they were supposed to it is void now
estro companies shall immediately
release the earnest money deposit to the
assigner so that five thousand dollars
they put down if they don't close by the
date that they're supposed to
it comes to me as the assigner assignee
shall be liable for all damages caused
by the assignor theoretically i could
sue them for any damages as well
here's the only way that they can get
out of it this clause shall apply unless
the assignee is unable to ensure title
to the property
sellers unable to deliver clear title to
the assignee
seller fails to execute all documents
necessary to timely close of escrow on
the sale of the property
so same things with the rpa if the
seller doesn't want to sell that's not
the assignees fault
if we can't get clear title it's not the
assignee's fault okay last part of this
if assignee does not fund the
assigned close of escrow date the
assignment of the residential purchase
and sale agreement is
void so if you don't close on the date
that we put right up there on the
assignee close of escrow the contract is
now void
and as this states the escrow company
shall immediately release earnest money
deposit to the assignor
in the event of concerning the
interpretation or enforcement of this
agreement the prevailing party shall
recover
attorneys and then the last part just
simply states that if there's any drama
it's gonna go through attorneys as long
as you both agree just sign there at the
bottom
and that is all the assignment is so
that pretty much covers
everything with all of our contracts we
like to make them super simple but very
transparent so the sellers have no fear
whether we're trying to pull one over on
them or if there's hidden language
it's all super simple and it's also
simple because it makes it easier for
you to explain to them
what's going on my whole philosophy has
always been try and be as transparent as
possible
it makes doing deals so much easier even
if you're going to make a lot of money
be transparent about it i have found
that sellers are much more likely to do
a deal with you
even if you're making a ton of money as
long as you're transparent
like i said these are the exact same
contracts that we are using
right now so there should be no reason
you cannot lock up your very first deal
today so if you guys got great value out
of this video do me a big favor make
sure you go and hit that like button if
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hit the subscribe button the little bell
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i release a video and as always make
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and another big thing is you want to
learn more about real estate investing
and you want to be coached by me
i'm taking on new students and all you
have to do is go apply at
futureflipper.com
my membership director will get in touch
with you on a call talk over
all the different aspects of it and see
if you're a good fit so get out there
and get your first deal guys i
appreciate you for watching
take care
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