- Contract Contingencies For Real Estate Investors Are Essential. Here’s A Quick Video on Real Estate Contract Contingency...
Hi, this is Frank Chen with REIClub.com, the only site you need as a real estate investor. Today I’ve got a quick video on real estate contract contingencies for real estate investors
A contingency clause in a real estate contract is language designed to protect you from unneccessary complications. Whenever you make an offer as a real estate investor, it is important to consider these contingencies especially for rehab type properties.
Many investors will tell you that contingencies may turn your seller off, but depending on the deal, you might still want to consider using them.
Today, I'll be talking about 3 common contract contingencies...
1) Mortgage Contingencies - If you are using public financing such as traditional, Veterans Affairs or Federal Housing Administration, you can setup your contingency to state that the deal is contingent upon whether you can get a certain interest rate for a set amount of the purchase price (generally 80 percent) by closing. This gives you time to shop around for the best rates. If you are unable to secure a loan at the stated terms, you can back out of the contract, and the earnest money deposit returns to you.
2) Appraisal Contingencies - Go hand-in-hand with the mortgage contingency. There are two ways appraisal contingencies work.
a) If a buyer can't get an appraisal that is at least as high as the seller's asking price, the buyer may back out of the deal.
b) If the buyer can't get an appropriate appraisal, the buyer can ask the seller for a lower purchase price. Then, if the seller refuses, the seller may back out.
3) Inspection contingencies - Give yourself a certain period of time (usually three to 14 days) to perform whatever inspections are needed to confirm the interest in the home. If these inspections reveal any problems, you, the buyer can back out of the deal.
Contingency clauses protect real estate investors when purchasing investments. Usually, you don’t want your buyers to have them when selling your house, but we’ll save that for another video. Just remember, when investors ask about exit strategies, contract contingencies create that option for you. When you use the right contingencies, you can ultimately reduce your risk down to virtually nothing.
Again, this is Frank Chen with REIClub.com. Please take the time to leave your comments for this video below and please subscribe to our YouTube channel so you’ll be automatically notified when we upload more quick video tips for you. Take care and good investing.