The Escape Clause No Real Estate Investing Contract Should Be Without

As with most things in life, and real estate investing is no exception, the one in control has the upper hand. By submitting an offer and getting a property under contract even prior to having every last detail figured out puts you in the driver’s seat. That’s where the most successful real estate investors strive to be, and quite frankly… that’s where YOU need to be!

real estate investing escape clauseNapoleon Hill, in his famous book Think and Grow Rich, mentions that poor people make up their minds slowly and change them quickly while rich people make up their minds quickly and change them slowly. This advice will serve you well when it comes to your real estate investing. You will be faced with important time-sensitive decisions on a daily basis and it will be in your best interest to make up your mind quickly as these decisions arise. For example: When you find a good deal, your first thought should be “How quickly can I get this under contract?”

And here’s why…

When in contract, you have control. And that’s what you want when investing in real estate, control. Don’t make the fatal mistake many real estate investors make by fearing the contract. The contract is your friend and one of your most powerful wealth-building tools in your real estate investing. There’s no need to fear the contract. Properly written contracts always have escape clauses, and if yours doesn’t, you can write them in. Those escape clauses allow you to bow out of a deal with integrity should your due diligence reveal something undesirable about the property. Depending on your State or situation, you may have to pay a small option fee or nonrefundable deposit to have your escape clauses included, but it’s typically a very small price to pay to get into the driver’s seat of a good deal.

Here are some of the subjects you’ll want covered by escape clauses.

“Get Out of Jail” Clauses for Your Protection

  • Escape if you don’t like the physical inspection report
  • Escape if your financing falls through
  • Escape if repair costs don’t meet your expectations
  • Escape if ‘anything’ is discovered that affects property value

Click here to download the “get out of jail” escape clause that I use in every contract that I write.

Now that you’re in contract it’s time for your due diligence (inspections, conveyances, zoning research, title research, etc). Should something negative come up during your due diligence period, however, don’t be so quick to defer to your escape clauses. Remember, you want to change your mind slowly. Try another round of negotiating first, and as you should be doing from the beginning… NEGOTIATE EVERYTHING! Another reminder: YOU have control. You can ask for anything, and just because you ask for something and the Seller doesn’t agree to it doesn’t mean that the deal is dead. The Seller cannot cancel the deal. That’s the beauty of being in control of the deal via being in contract, and by including your escape clauses in the contract, you can conduct your real estate investing virtually risk free.

Here’s the takeaway: When you’re NOT in contract, the Seller has control. What you ARE in contract, the Buyer has control.

Comments

  1. Every one capable should do deals with no money down…I just need to do my first one and the rest should be historic!

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