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Understanding Contract Conditions Clauses - For Your Protection!

By: Darius M. Barazandeh, Attorney at Law / M.B.A.

You may hear conditions clauses being called ‘weasel clauses, or contract contingencies.  Conditions clauses allow the buyer or the seller to end the contract upon the happening or non-happening of an event.  Your purchase contract (and the one we provide in this program) has several key conditions clauses.  This is because in wholesale transactions you will want the right to end the contract or re-negotiate purchase price if the property turns out to be less attractive than you thought.  

For example, you may discover that there are additional liens on the title report that the seller did not know about.  Your retail flipper may inspect the property with you (after you have a contract with the seller) and may discover that the foundation is slightly cracked.  A conditions clause allows you to re-negotiate the contract or cancel the contract upon a certain condition being found.

We keep our conditions clauses very broad.  For example, one of our clauses allows you to end the contract or re-negotiate if you find out that the property is not worth what you originally thought.  For example, assume that you do some preliminary market research and believe the property is worth $150,000 and then sign a purchase contract with the seller.  Later you discover the property is really only worth about $120,000 and that your comparable sales were skewed.  The right conditions clause would allow you to re-negotiate or simply end the contract.

Conditions clauses are common, but not required for a contract to be valid.  Nevertheless, they are a very good idea.  Here are some common examples:

  • Financing Contingency:  Contracts may be contingent upon the buyer obtaining financing.  For example, the following contingency is in place (just in case) a new loan is required but cannot be obtained:

“If a new loan shall be required for Buyer’s purchase of said property, then this agreement is subject to Buyer’s obtaining a new loan for the amount of $____________________ with an interest rate NOT higher than _____________% and an amortization period NOT less than  ____________ months.”

  • Subject to Inspection:  Here is an example from our contracts:  Contract and terms are subject to:

[Buyers]  “…review the properties’ marketability, value and/or condition with Buyer’s agents, business partners, and associates.  If this is not satisfactory, Buyer may end this agreement without default or adjust the price and terms of this agreement.

  • Title Contingency:  Here is an example of contingency that allows for re-negotiation or an end of the agreement if there are title issues.  This example was taken from our contracts:

[This agreement is subject to] “…a title review of said property.  If title clouds, liens, undisclosed issues, defects affecting title, property surveys, ownership disputes or clouds, zoning issues, debts, levies, or restrictions of use of any kind, are found then the Buyer has sole discretion to end this agreement without default.  In the alternative the Buyer may adjust the price and terms of this agreement without prejudice or default.” 

  • Approval by Buyer’s Partner:  This is the notorious conditions clause that everyone talks about.  It simply reads:

“This agreement is subject to approval by buyer’s partner.”

This clause basically allows the buyer to get out of the contract for nearly any reason, because typically the buyer’s business partner may be their friend, spouse, etc. 

However, before you get too carried away with conditions clauses, understand that exercising a conditions clause unfairly or at the last minute and thereby causing loss to the seller, will make you liable for violating your implied duty of ‘good faith’ and ‘fair dealing’.  Moreover, you only need one or two good conditions clauses in a contract to be sure you are protected.

To learn more about how you can start wholesaling properties with very little cash (as little as $35 per property) please see 'Attorneys Secrets to Quick Cash Wholesaling and Flipping Properties'.

You can also email me if you have any questions: taxenterprises@yahoo.com

 

To learn which mistakes to avoid, how to create, run, and maintain an ‘iron clad’ LLC or

corporation please see Mr. Barazandeh’s, Wealth Building LLC and Incorporate for 

Wealth™ courses.

 

To learn more about business entities, tax choices and charging order discussion, please

 listen to our free AUDIO SEMINAR! (no downloads required!)

I want to wish you the best of luck in your endeavors and email me if you ever need help!

If you plan to invest in Texas please see: Texas Houses for Pennies

 If you plan to invest in tax lien certificates states, please see: The Attorney's Step-by-Step Guide to Investing in Tax Lien Certificates 

                 ______________________________________

Information contained within this article was not intended to be, nor should it be taken by the reader as legal, financial or tax advice. The above article was written for educational purposes only.  If the services of a Texas attorney are desired please contact Mr. Barazandeh or seek the services of another attorney.

 

 

EVERY EFFORT HAS BEEN MADE TO ACCURATELY REPRESENT OUR TRAINING SERVICE AND ITS POTENTIAL. HOWEVER, THERE IS NO GUARANTEE THAT YOU WILL EARN ANY MONEY USING THE TECHNIQUES AND IDEAS OF OUR MATERIALS. TESTIMONIALS ON THIS WEBSITE ARE NOT TO BE INTERPRETED AS A PROMISE OR GUARANTEE OF EARNINGS. EARNING POTENTIAL IS DEPENDENT ON THE PERSON USING OUR TRAINING, IDEAS AND TECHNIQUES.

ALL TESTIMONIALS ON THIS WEBSITE ARE REAL. HOWEVER, YOUR LEVEL OF SUCCESS IN ATTAINING ANY RESULTS DEPENDS ON THE TIME YOU DEVOTE TO THE PROGRAM, YOUR SKILL LEVEL, YOUR FINANCES, AND OTHER FACTORS OUTSIDE OF OUR CONTROL. SINCE THESE FACTORS DIFFER ACCORDING TO INDIVIDUALS, WE CANNOT GUARANTEE YOUR SUCCESS OR INCOME LEVEL. NOR ARE WE RESPONSIBLE FOR ANY OF YOUR ACTIONS.

 

Questions? Email our Super Hero Support Team and Darius

at:  wealthtraininghelp@gmail.com