Great to see your response. I do want to let you know that I highly respect your opinions. You are far wiser and more experienced than me.
I will make 3 comments.
By using the standard contract approved by the Realtors and the Bar, much of the wording has already been challenged in the courtroom time and time again. Yes, alot of the legalese is barely understandable by the layperson, but it is there for a purpose, mainly for when things go sour. I’ve seen alot of home-made contracts that leave out alot of basic elements and disclosures. Granted, none of this really matters until someone cries foul and starts a lawsuit. Then the wording in the contract becomes crucial. It’s alot easier for a judge to go along with the wording in the contract that his state Bar (that he has to answer to) created than it is to have some home-made contract. On top of that these standard Contracts get updated about every 2 years in order to comply with new changes in the law.
Almost every contract I submit to a seller has an addendum attached to it. My addendum that myself and my attorney have drafted. This addendum slants the contract to make it say what it needs to say to favor ME either as buyer or seller. I actually have about 10 different addenda that I use depending on the situation. One for short-sales, one for wholesale flips, one for retail flips, one for lease option, one for me as cash buyer, one for me as seller, etc., etc. depending on the particular situation. My addendum is what protects me and makes the transaction favor me. Most are only about half a page long but pack alot of punch.
I’ve done it both ways. When I used to draft my own contracts, in about 1 out of every 5 transactions someone on the side of the other party (friend who invests in real estate, brother who is an attorney, neighbor who is a Realtor, etc.) would make a fuss about the contract. And then when I sent it over to the title company or the buyer’s lender they would make a fuss about it many-a-time also. And heaven forbid if the other party is represented by an attorney or a real estate agent - those guys will shred a home-made contract, at least around Florida. I finally figured, why fight everybody over this stinking contract thing. That’s when I started doing the addendum thing. By using the addendum, I’ve eliminated about 99% of the objections.
I hate to say this, but I totally disagree with what Mr. Britton has to say. I know he is a pretty sharp guy, and I hate to step on his toes. Let me elaborate on my thoughts.
The Realtor contracts, at least in Florida, but I assume in most states are reviewed and scrutinized by the state board of Realtors and the state bar association. The clauses contained in these contracts have been heavily scrutinized by dozens of lawyers and the court system as well and have lots of statutory and case law built right into them. On top of that, all the local Realtors, attorneys, and title companies know what the contract says without having to re-read the whole thing everytime.
If you use some home-made or found-in-a-course contract, you don’t have any of the heavy scrutinaztion that you do with the standard Realtor contracts. On top of that, many of those contracts may violate state law or lack certain disclosures required by law. Of course you could pay an attorney $200 to draft a contract for you, but why reinvent the wheel?
In my opinion, it’s a whole lot simpler to use the standard Realtor contract and tack on an addendum to meet your special needs depending on the situation.
Re: contracts used for flipping - Posted by Scott Britton
Posted by Scott Britton on October 14, 2002 at 12:35:56:
Stan,
What you need is a GOOD purchase contract. In my opinion, you are missing the boat using a “Realtor” contract or any other pre-printed form. You should design you own, make it simple to understand and easy to accept… and know exactly what it says.
Contracts are not difficult. JP sells my course on this topic in her catalog. It’s called the “Sure-Fire Quick Start Guide to Real Estate Success!” and contains a section on Contracts second to none… plus lots more.
The real inside game of Real Estate is played by those who control their own paperwork. Learning how to do this opens doors many other investors will never know exist.
Re: contracts used for flipping - Posted by Scott Britton
Posted by Scott Britton on October 15, 2002 at 20:31:58:
Rob,
Since we agree to disagree (which is good in my opinion), let me challenge your statements.
Your opinions seem to be founded on the presumption that the “Board of Realtors”, the “State Bar Association” and the “Title Companies” have your best interests as a “Buyer” at heart. My opinion: They have their best interests at heart. All contracts contain a bias. Generally speaking, it’s always in favor of those who draft the contracts. Knowing this… why wouldn’t you want to be the one drafting the contracts?
Have you ever read the “Standard Realtor Contract” in Florida? Who in their right mind would ever sign one as a Buyer, unless they thought it was mandatory?
If everybody is so familiar with these contracts, how come nobody can explain them? Have you ever seen a Realtor, an Attorney, a Title Company go over a “Standard Contract” line for line and explain it to all the parties? I haven’t. In fact, I think you would be hard pressed to find anybody who can tell you exactly what’s in the darn thing. Which brings me to my next point:
For a Contract to be valid, there is suppose to be this thing called a “Meeting of the minds”. If the Buyer and Seller don’t understand the language of the contract because it has been drafted by Attorneys, REaltors Attorneys and Title Company Attorneys and everyboy elses Attorneys… tell me where the “Meeting of the Minds” exists.
I do, however, understand that the “average” investor will never tackle the paperwork themselves. Why? I’m not sure. Maybe they are intimidated by it. Maybe they think its beyond their control. Maybe they think they have to go to Law School before they can do this. What they miss is the fact that controlling the paperwork is where truly unbelievable transactions are made. Don’t misunderstand this. I’m not saying that anybody is being taken advantage of. Nobody is getting screwed. In fact, your personal integrity is what will propel you in this business farther than any tricky formula you can learn.
The contract I created for myself has been readily accepted in my area. In fact, it sometimes surprises even me to see how many people use it… or something very close to it now. I got a fax the other day from a Mortgage Company on a repo of theirs… they insisted that I had to use their contract. Guess what? It was my contract. How they had gotten a copy of it I’ll never know.
I’ve never had heavy scrutinization of my “home made” contract. In fact, I had a Realtor ask me the other day if people accepted my contract (his objection). I simply said its the only contract I ever use when I’m buying. After it was all said and done, he said that was the fastest he has ever sold a house. The contract simply wasn’t an issue. Selling the house was the issue. We did it fast and with very little hassle on his part. Everybody was happy.
I know this has gotten long winded and I doubt I will change anybody’s mind here (except for that one person). But it’s all about control. I want to control the process. I want to be in control of my investments. I want to control my destiny. Letting somebody else, like the Government, control me through their mandatory contracts (see HUD Repos, Section 8, etc.) is not my style and I refuse to participate. It’ s just my independence I’m trying to maintain. That’s why I love this business so much. After all, this is still America, baby!
Hope I didn’t step on anybody’s toes here. But, if I did, then maybe you are better suited to work for somebody else… being told exactly what to do and how to act. Or maybe we disagree about the definition of an Entreprenuer.