Dear knowledge seeker,
Does $200,000 sounds like a ton of money to you?
How about $500,000?
Or Even $1,000,000?
Sure that’s a ton of life changing money, but at some point in your Real Estate career writing these kind of offers won’t even phase you.
That comes with experience though…
But if you’re a new Real Estate investor or new Real Estate agent putting in your first few offers can be intimidating because you have never dealt with numbers this high.
I know when I started I didn’t…And it was nerve racking.
My first deal was for around $260,000 and at the time it was intimidating to put in an offer that had the number $260,000 in the offer price.
I was only 23 years old. I was broke, could barely eat most of the time and I was just out of college.
I never even saw that kind of money written anywhere in my life…let alone offering it to someone else.
As many of you know I have my Real Estate Broker’s license… and I am constantly looking for deals, and helping put them together to make deals happen.
Well, like anyone else, when I first started I had to wrap my head around and understand that actually putting in an offer has no risk at all for the buyer…which means there is nothing to worry about.
Let me explain.
I’m talking about a little thing called ….
Contingencies on dictionary.com is defined as “dependence on chance or on the fulfillment of a condition; uncertainty; fortuitousness”…
What does that mean in English?
Ya I hate lawyer talk too. My motto is keep it simple. So let me explain…
In our case we are talking about a buyer. So a contingency simply means… I agree I will pay you x amount, but I have to check out ____ first otherwise I can cancel and I don’t have to pay you anything.
Think of a contingency in Real Estate as a “safety net”.
In the world of Real Estate there are all types of contingencies:
Loan contingency -“I have x number of days to get a loan approved otherwise I can cancel and get my money back”
Appraisal contingency- “I have x number of days to get the house appraised otherwise i can cancel and get my money back
Inspection contingency– “I have x number of days to inspect the house and decide if I want to moveforward or not…if not I can cancel and get my money back”
Replacement property contingency– “I have x number of days to find a new property to move into, and if I don’t find one I can cancel the transaction”
So given our new “in-english” definition… on our offers when we are paying CASH we are using an inspection contingency.
An example of your offer may be:
$200,000 all CASH
14 day escrow
10 day inspection contingency
In English this means that you are willing to pay $200,000 for a property, you will put $2,000 down as good faith that you will close, you can close in 14 days and you have 10 days to inspect the property to decide if you want it (inspection contingency)or not.
So you would have 10 days to decide if you actually wanted to move forward with this purchase or not.
If you decide not to move forward you can cancel and because of the contingency in place you will get your $2,000 deposit (EMD) back.
So really putting in offers is risk free for you.
Please NOTE: DO NOT put in offer that you think you can’t close on. The inspection contingency is a safety net… things change, maybe new repairs pop up, or your money gets tied up, or maybe your business partnership splits up so you can’t close and that is why the contingency is in place.
A contingency gives you x amount of time (it’s negotiable) to get your ducks in a row and say “ya let’s do this…I’m ready to close”.
Once your inspection contingency is removed your EMD is on the hook.
So if you cancel AFTER you remove your contingency IN WRITING (big hint there), you may lose your initial deposit (the $2000 in the above example).
There are tons of other guidelines and rules, and even extensions that you can put into place, but that is what you need a good Realtor, experience, and mentors for…
Sure you can learn everything yourself through trial an error, but for a HUGE shortcut, to get all the tools/knowledge, to save money/heartache and to get the connections you need to get on the fast track to success CLICK HERE.
Lastly: please, never be scummy and use the contingencies to scam people. You’ll get a bad reputation and no one will want to work with you. Always think long term and only get into deals you think you can close on.
To make sure you only get into deals you can close on and for a free 7-day mentorship on how to build wealth through Real Estate, Education, and Connections CLICK HERE
Chris M Cordova
CFO Better Tomorrow Group
Chris is an active investor, Realtor, Broker, marketer, serial entrepreneur, and co-founder of Better Tomorrow Group. Follow Better Tomorrow Group on Instagram@bettertomorrowgroup on Twitter/Periscope @TheBTgroup and Facebook at Better Tomorrow Group. If you would like a FREE copy of Flipping Your Thoughts On Flipping Follow this LINK.