Understand Unequal Standardized Contracts - dummies

Understand Unequal Standardized Contracts

By Eric Tyson, Robert S. Griswold

Copyright © 2015 Eric Tyson and Robert S. Griswold. All rights reserved.

Some real estate seminar promoters, infomercial mavens, and authors (such as Robert Shemin), recommend that you create your own standardized contracts — one for buying a property and a different form for selling a property. A quick review of his sample contracts reveals why he makes this recommendation: The terms and conditions of each contract are clearly one-sided. For example, the “standardized” contract that he suggests you use for buying a property contains a provision for a 120-day escrow, a litany of contingencies that give you essentially an unlimited ability to cancel the escrow without penalty, a broad assignment clause, a stipulation that the seller pays all costs, and no mention of an earnest money deposit.

The contract you’re to use when you sell your property requires a ten-day escrow, provides the buyer no contingencies and no access to the property, states that the buyer pays all the costs, and demands a nonrefundable earnest deposit. Furthermore, he advises that the key to pulling this off is that you actually have these forms printed with the words Standardized Contract. Then, if the other party questions any of the terms, you simply say that it’s a standardized contract and you can’t make any changes.

This type of advice has given the late-night real estate investment information gurus a dubious reputation. Of course, many of these items are negotiable, and there is absolutely nothing wrong with requesting different terms based on legitimate market factors. Maybe you need to close on another property, so you require a 60-day escrow instead of 90 days. That is a justifiable business reason, but we strongly encourage you to treat everyone you deal with in a respectful manner. If you plan on having a long and successful career investing in real estate in your local community, your reputation as a straight shooter is extremely valuable to you, and you should never engage in such practices.