Contracts are the backbone of every real estate deal. Understanding what you are signing — and what to include — can mean the difference between a profitable deal and a legal nightmare. At Real Estate Sales LLC, we make sure our students understand contracts before they ever make their first offer.
Why Contracts Matter
A real estate contract is a legally binding agreement between buyer and seller. It outlines the terms of the deal: price, contingencies, timelines, and responsibilities. A well-written contract protects your interests and gives you leverage. A poorly written one can cost you thousands — or land you in court.
The Purchase and Sale Agreement
This is the most important document in any deal. It includes the property address, purchase price, earnest money deposit, closing date, and any contingencies. As an investor, you want flexibility built into this contract — especially inspection contingencies and assignment clauses.
Contingencies: Your Safety Net
Contingencies are conditions that must be met for the deal to close. Common ones include inspection contingencies (allowing you to back out if major issues are found), financing contingencies (protecting you if your loan falls through), and appraisal contingencies. Never waive contingencies unless you fully understand the risk.
Assignment Clauses for Wholesalers
If you are wholesaling, your purchase contract must include an assignment clause — language that allows you to transfer the contract to another buyer. A simple phrase like “Buyer and/or assigns” in the buyer name field can give you this flexibility. Always verify this is legal and enforceable in your state.
Earnest Money Deposits
Earnest money shows the seller you are serious. It is typically held in escrow by a title company or attorney. The amount varies — $500 to $5,000 is common for investment deals. Understand exactly when your earnest money is refundable and when it becomes non-refundable.
Closing Documents
At closing, you will encounter a stack of documents including the deed, settlement statement (HUD-1 or closing disclosure), title insurance policy, and loan documents if financing. Review everything carefully before signing. Never feel rushed — ask questions about anything you do not understand.
Always Use a Real Estate Attorney
Even experienced investors have their contracts reviewed by an attorney. The cost is minimal compared to the protection it provides. An attorney can spot issues you might miss, add protective language, and ensure compliance with state laws.
Get Contract-Confident with Us
At Real Estate Sales LLC, we provide our students with investor-friendly contract templates and walk them through every clause. Our Flip Cheap Houses™ training ensures you never sign a contract you do not fully understand.
Visit FlipCheapHouses.com to master real estate contracts!
