Step-By-Step Guide To A Purchase Agreement | REIal Talk | The Freedom Show | EP.94

Foreign.

Hi, guys. I'm Lauren. Welcome back to our podcast called Real Talk for Real estate Investors. This is podcast number 93. Today. I'm here with Tiffany Biddle, our transaction coordinator.

How are you?

Doing good.

Doing okay.

Doing okay, yes.

We need some grace on this podcast just because you're getting over being sick. Everyone in the office is struggling with allergies from the fires up in Canada. It's definitely not as inconvenient as it could be, but it's slight inconvenience just.

Because we're all feeling under the weather.

Glaze over everything.

Yes, exactly. It's a glaze.

Weird.

Yes. So if one of us sneezes, the.

There's going to be lots of sniffles.

Just be patient with us.

So we'll go ahead and get started. So if you remember from our vlog 109, we talked about purchase agreements, this is going to be a little bit of a deeper dive into the topic. You know, going over more terms, definitions, stuff that investors will need to know about purchase agreements. So we all become more familiar with the process.

We all get a little more comfortable with it.

Yeah. All right. So my first question, I guess not really a question, but go ahead and explain each step of who prepares for the purchase agreement?

Yeah, so of what? Like we're preparing in the purchase agreement. Yeah, yeah. So we like to make everything as easy as possible. So whether we are buying a property or we're selling a property, we prepare the purchase agreement nine times out of 10. So it's, you know, it's our job. It's probably not your job. If you're buying property, you're probably not doing that full time. So let us do the hard work. Let us do the heavy lifting. Yeah. So we'll prepare everything for you. It's either myself or it's Carla. Like I said on the vlog, if you listen, you're going to hope that it's Karla. She makes less mistakes than me. She's just. She's. She's fantastic. She's much more thorough, and she does it more often than I do. So when I jump in, sometimes I.

Get to know when I have questions, I'll go to Carla.

So the things that we are putting in the purchase agreement, I guess individualizing in each one, you're gonna. First, you're gonna identify who the seller and the buyer are. And that's not just as easy as saying John Smith. What if John Smith is. His full name is Jonathan Smith? That's what he wants it to be. You know, you Can't. Probably not going to go with like a nickname, you know.

Right.

Also because I just don't go by that at all. But I'm not going to put that. I'm going to put my full name. And if you are buying in an llc, we need to know that. So Smith Rental Properties llc, if that's what you're buying in, we need to know that so that we can put it on the purchase agreement. We can do an addendum later on to change the name or we can cross it out, put a different name on there and initial next to it. If you decide to, say, add your spouse onto the purchase agreement or that it's only going to go in one spouse's name versus both of you, that happens often and we have to go in and change that or you decide to put it in an LLC later on, that's fine, we can do that. But to make it a little bit easier, if you know that up front, just tell us so that we can go ahead and put it the right.

It sounds like the details matter, like little details matter.

Little bit. Yeah. Like I said, we can change anything, right? Yeah, but it's just, it's just more signing for you to do and you know, when you've just got things coming at you from us and from the lender and from the title company, like it's just easier to just do it the first time. Yeah, yeah. So we don't mind to send an addendum. It's not a big deal to us. It doesn't take very much time, but, you know, it's just easier to have it up front. So having those details of how you want to buy the property is great. And then obviously for us, I'm not selling the property, so I'm not going to put Tiffany Biddle, but I am signing it. So I will sign it as Tiffany Biddle authorized signer. The seller name is going to be our LLC. So we have a couple different LLCs that we buy in. And so you'll see a name that's not Freedom Family Investments. And that's okay. Just know that that's the LLC that we purchased the property in. So, yeah, so that's how you would very clearly kind of identify each party, a description of the property. So you're going to put not only the part property address, but we put the parcel number on there as well. Sometimes there are multiple properties. We actually bought. We bought a property that had five parcels. Luckily they actually consolidated it into one before we purchased it.

Oh my.

Yeah. The seller did that great. But we could have bought a property that had five parcels and it's just split up. Very, very weird. You know, it doesn't. Yeah, it's not a huge deal because the taxes on a parcel are very, very, very minimal. You know, you're talking 14 bucks for half of a year. You know, it's not, it's not anything that's going to make or break it, but it is like it is important to have it because what if your house is sitting on two parcels? You don't want somebody to own half of your house or to have it be something weird later on. So we're not going to keep those parcels. We're going to transfer them all to you so that you have, you know, full rights of that entire property.

That makes sense.

Yeah. So we'll list those out. The purchase price. That's pretty easy. You know, if you're. If we're buying a property and we're making an offer, then we're going to put what we're offering. If we're selling a property we've already discussed, you know, this is what it. This is what it's being purchased for or sold for. Right. So we would put that agreed upon purchase price for the property being sold, the payment terms. So usual methods are cash or financing. There are creative options like seller financing. We don't really do that very much, if at all. I actually was just talking with somebody in our team the other day when we saw something that's seller financing. I said, I don't even know how to work through that because we don't do that. So we do cash and we do financing. That's the biggest thing, the conditions of the sale. So if it's contingent on you obtaining financing, then we need to put that in there. I believe ours does have like a financing contingency in there. We have an appraisal contingency as well. When you're buying a home off the MLS to go and live in, you're going to put like. Like you might put contingent on the sale of your home, which is also listed on the market or which is under contract. So those are the conditions of the sale. Like if those things aren't met, this sale won't be completed. Basically representations and warranties. So sorry. So any guarantees or warranties that we are giving to you, you'll want to have in that purchase agreement. We talked about this a little bit on the vlog. So sometimes a warranty or a guarantee will be in the actual purchase agreement. Sometimes it will be on a separate addendum. Sometimes that is because the lender is going to require it to be on a separate addendum.

Oh, okay.

Sometimes they just don't want to see those. They don't want that stuff. What they want is like the base contract. Right. They don't want all this extra stuff because it just complicates it for them. So sometimes those warranties just go on a separate addendum for that reason, but also because our contract was. An attorney helped with that contract. So we just want to make sure that we're not changing what they are doing there. Right. So some of the things that are in our contract purchase agreement are in there for a reason, basically. And we can't just go and change everything on it. So that's why we do add addendums that override those things. Let's see, where are we at inspections? Yeah. So this is whether we're buying or selling a home. We've got an inspection section in there. So if we're buying a property, we've got X amount of days to inspect it and say, you know what, this isn't for us, or yes, we're going to move forward. Same if you're buying property. If you're buying property, you have in our contract seven days to inspect. I'm pretty flexible with that. I'm the one that schedules the inspection. So if it's a tenanted property and the tenant inspector schedules, it doesn't work out until day eight.

Yep.

Okay, we'll make it work. Just stay in contact with me and be communicative in that and we'll make it work, obviously, but we're not trying to go 20 days before we get.

Yeah, exactly. Exactly.

At that point, we're looking at closing, not doing inspections. And then also the time frame obviously of when you would notify us of any issues that you find on our end in our purchase agreement. It lays it out pretty easily with like, you just send us the report. We want to make it very, very easy. So you just send us the report and we will start working on coming up with some remedy proposed remedies on our end as well. As, you know, if you have, hey, I'm concerned about 1, 2 and 3. Cool. We'll. We'll look at those specifically, but we'll also look at these other items that are on there. So we make that. We make all this pretty easy for you. But we. Let's see. Closing date. So that's a important one. That's typically around 30 days. If you are using financing. If you're using cash, we can close as soon as the title searches back.

Right.

You're ready. If you want to pay cash and you want to close in seven days, okay, we'll make it happen. If you want to, you know, close in the standard 30 day timeline, that's fine as well. So we're typically not doing like a 60, 90, 120 day close. You know, we do have some flexibility, but there, if you've discussed something with us, some people have said, I'm going to buy multiple properties, but they have to be spaced out a couple weeks different. Okay, that's fine. But we're going to stick to like a 30, 35 day closing time frame initially. On most of our properties there will typically be a section of, you know, any consequences or remedies for defaulting on the contract we don't have. I'll be very, very honest and say I haven't studied that section too much. But there are different things that, you know, if you're, if you have this many days to do this, this many days to do, to inspect, you know, there are different ways that you could default on that purchase agreement. But as we discussed before, earnest money has to be signed off by both parties to be kept by the buyer or to be released to the seller. And that's usually what the consequence or penalty is for defaulting on the contract is that the earnest money gets withheld from you. But you know, we're, we're going to hopefully be in communication the whole time and hopefully that's not an issue. Right. We don't have that happen a lot because, you know, we, we just communicate. Yeah, yeah, I think very, very well. And as long as you're communicating with us, there shouldn't be a default of the contract if you're getting it inspected and you decide, you know, it's not for you. Okay, that's, you know, let's chat about that. Let's, you know, make sure you talk to us so that we, we understand because it is our property and we want to, you know, make that right for the next person.

I mean, it sounds like it's a good thing that you don't know a whole lot about that section because it means we don't do it that often.

Really. We really don't. I mean, and I don't mean that in a bad way like that. We just, we want, we want to work with our buyers. Yep. Right. We don't want to like throw a contract at you and be like, you didn't do that. Holding all your money. That's not going to be good for us. Yeah, Good for our business. Right? Yeah, that's. It's not good to just throw that at you and just whatever. We would prefer to work with you and see what can we do to get you into another property that might be better for you. And that's what's happened before.

Oh, yeah.

Somebody's just said, you know what? I don't feel good about this property. Okay, let's get you into another one. Or after reviewing the finances, I can't make this property work. I don't have the financing to make this work. Okay, let's get you into another property. If we can do that. And multiple times. So there are many, many, many different ways that we can work with you so that we don't have to enforce that section so hard.

Yeah, because like, our whole, our whole, like, idea, our whole identity is investors helping investors. And so we want to be able to help you reach your financial goal, but also not. We want you to feel comfortable as well with the whole process. No anxious feelings of finances or if the property is a good area or like if you're uncomfortable with the tenants or location, stuff like that. That's why we are investors helping other investors. And that's the whole point of the company. So whenever an investor is not comfortable. Yeah, exactly. We'll get you another property that fits your standards better, accommodates you better, and helps you reach your financial goals better than the previous property.

Already there's nothing I love more than an investor saying, you know what? I don't want this property. But I really don't like saying that because I want to still work with you guys. I'm like, that's great. That's fantastic. We are fine with that. You know, we've had people that. The very minor, a very minor issue has made them nervous. And I've said, this is easy. We can fix this. This is an easy fix. And they said that's the one thing that they get nervous about. Okay, I get it. Let's go to another property. You know, so anyway, that's a very long roundabout way to say we want to work with you. So we, you know, the penalty or, you know, the earnest money being held by somebody, it has to be signed off on by both parties anyway.

Right.

Otherwise it just gets held to title and it costs them money. And we're not in the business of costing our title company a lot of money.

So it's true.

So the next section. So signatures, obviously you're Both going to sign and date the purchase agreement. We use Dot Loop, which is an electronic signature service that automatically dates it for you. It gives you, like, the date, time, and I think, like, the IP address or something. There's a whole bunch of numbers at the bottom. I'm assuming that's. So it automatically dates it in timestamps when you sign that. So that's great. The. Okay, so this section says review and legal advice. Yeah. So before signing, it is very, very important for everyone to review the contract. So I review it. If Carla fills it out, I review it, I look through it, and I just make sure, like, everything is in there the way it's supposed to be. 99.9% of the time it is, but I just make sure. Right. I don't want to sign something and then have it be wrong, you know, and then it creates this whole thing. Well, we signed it. You know, I would just rather just take the few minutes to review it. Yeah, it's only a few minutes on my end because I've reviewed so many of these. But it is important that you review the document, ask questions. That's okay. We've had so many people ask questions. We've had people ask questions about every single one that they sign before they sign. Like, hey, I want to know about this. And we can see in dotloop, you know, it'll say that this has been signed. This is not. This is not. And so I can kind of see where you're at in the process when you're asking these questions, and that's totally fine. So feel free to ask questions if you need to seek legal advice to make sure that that's, you know, that this is fair. That's your prerogative. You can do that. We do ask that you don't take this and have a lawyer review it for a week, because at that point, we may have moved on to another buyer. Especially if you're not talking to us, what you're doing, you know.

Exactly.

We've had people who've taken it to their attorney to review, and then a week later they come back and say, sorry, it's gone.

Took too long.

Yeah, you didn't tell us. You told us a lawyer was reviewing it, but you didn't ever.

No updates.

Yeah, no updates. No response when we. It's gone. Right. So you just have to make sure you're talking to us about that, and hopefully it's somebody that can review it quickly for you. And then after that, you know, you just want to provide everyone with a Signed copy, once it's signed and everything's done. So just kind of do that electronically. Right. So we'll send you a copy, we'll send it to title, we'll send to the lender. We've got it on file with us. So everyone should have a copy of that. Electronic, electronically. This is a one sided sheet.

That was a lot to go through. It seems like in purchase agreements and contracts you can see you, we're all on the same page. So they have access to quite literally everything that we have access to about the property. Just so they are fully aware of everything that has to do with it. Yeah, it's like a completely open book.

Yeah. And I didn't include this but I had thought about it before. Not only with our purchase agreement, you're not just going to get like the eight page agreement. Yeah. But you're also going to get any addendums like we talked about. But there's disclosures like we list our properties on the mls. So we want to, we need to disclose if there are any issues. Now a lot of these properties we've never lived in. So little issues that you might encounter when you live in a property we don't know. And so we can't say, yeah, there, you know, there's been this in the last five years. We don't know. We've been in and out of this property in a few months. And so you know, there's not a lot. But if we know that there was like a huge. When we bought this property, the basement flooded and you know, we've had some of those. So yes, if something like that happened we would disclose that to you. We would say this is what happened. These are the steps that we took to remedy it should no longer be an issue. But you have to disclose that. And so we want to make sure, you know, lead based paint disclosure, we have to disclose that we have no records of it having lead based paint. We have to disclose, you know, there's an agency disclosure that we just have to say, you know, our listing agent is so. And so we have, we have a couple different. That's why I can't give you a specific name. It's. It's Darcy or it's Flip, you know, most likely. But that's who our listing agent is. And, and they only represent us. So it's just saying that you don't have an agent representing you. That's not a big deal on your end. Because our listing agent is typically just, it's just who we're listing the property under, you know, they're not. They're not doing anything that you're missing out on by not having an agent. Right. And then what is the other one? There's a affiliated business agreement or arrangement, something like that. It's called an aba. I can't figure out what that. But Affiliated business something. And it is basically saying that we are affiliated with Independence Property Management. We're affiliated with Bulldog Renovations, the people that do the renovation, renovations on the property. It's just we have to disclose that we're all affiliated together.

Right. Okay, that makes sense. It's all. We're. It's just we're on the same page. Yes, essentially.

Yes.

So the investor knows everything that's going on, everything about us, everything about the property that we know, all the information, the past information, if it's rented, the rent, literally everything. Yes. They know everything about it. So you know exactly what you're putting your money into. Yeah, that makes total sense. Thank you. I feel like I learned a lot.

Hey, when you said that we know everything you know, you know, everything that we know, that's what sparked me to say that. Yeah.

Oh, yeah.

It's.

It's transparency.

Yes. It'll look like a lot of documents. You'll get, like, six documents, I think, at once. But it's. Most of that is just, you know, realtor stuff that we have to do.

Exactly, exactly. So my next question is, what is the turnaround time on a purchase agreement?

Quick. So if somebody. Lauren, Caitlin, Chris, anybody on our team who's talking to you, if they say, hey, John Smith. John Smith is my favorite person. So if you're out there, John Smith.

One of our investors. John Smith.

Yeah. So John Smith wants 123 Main Street Cool. Well, we are ready to go. So Carla and I will. One of us will take care of it, and probably in, like, I will be very conservative here and say a couple hours, it's probably a lot. It's a lot faster than that. Usually, getting those purchase agreements to you is. It's important to us. Right. Because when you're ready, we want to get you that purchase agreement so that you have time to review it before, you know, if we want to move on to somebody else, we. We don't want to move on to somebody if you haven't had time to review it. So it's very important. On my end and Carla's end, we are very, very fast with what we do. I pride myself in being very fast, and I push Carla to be very fast as well. Not that she needs much pushing because she is very, very, very quick with what she does. But we turn that around pretty quickly.

Okay, good.

I just say a couple hours to be safe. You never know to be safe. You never know if somebody's like taking a lunch or something.

Yeah, it's nice. A couple hours still isn't that long. Exactly, exactly. As if, say, our buyer. What are some things that I would need to know to prepare for or that you need from me for a purchase agreement?

Yeah. So I would need. From you or we would need to know. Basically the biggest thing is what you're buying the property in. Is it your name? Is it you and your spouse's name? Spouse's name or an llc? What name are you purchasing this property in if you know it? Because like we discussed on the vlog, if you don't know yet if you're going to use an LLC or if it's going to be your name or you're going to have to add your spouse on, that's okay. We can fix that later on. You can just put your name. But if your name is John Smith and your full name is Jonathan Smith, we probably want to put Jonathan Smith. We probably want to put your full name on there just to be safe, because that's most likely what the lender is going to want. So we need to know that. We need to know your. What property you're purchasing, obviously, which Lauren, Caitlin, Chris, you know, our whole marketing team, whoever is talking to you, they're going to tell me that. So you don't have to tell me that. And then, yeah, cash or financing, which one are you. Are you purchasing with? And that's kind of. That's kind of it.

That's nice.

That's really all we need to know from you. Yeah. If you're, you know, if you've got a weird situation worked out with a closing timeline that you've worked with somebody about, then they'll communicate that to me. But otherwise, as long as everything's kind of normal with the sale, we just need to know what your. What name you're purchasing it in.

Yeah, okay. Okay, that's cool. That sounds very easy.

Oh, and your email, I guess. So if your spouse is with you, we do need their email. So that is one thing, that if we only have one email, we can't put one email in there twice. That's a dot loop. No, no. Which I understand, because, you know, they don't want you clicking in for somebody else.

Right.

So, yeah, that is. That is the other thing that Makes sense. An email for each signer.

Another one I have is if you could list things off in, like, one word. What information can be found on the purchase agreement? Just, like, in one word. Like, everything is one word.

Just one. Just one solid word.

No, a list of things in one word.

So what can be found on the purchase agreement? So names of the parties, the. The address, the contingencies, the purchase price, earnest money, deposit, cash, or financing. That's three words.

That is three words.

But that would be a contingency. Financing is a contingency. Closing dates, signatures.

That's okay. Yeah, yeah. Not a lot. But it does come in a lot of paper, I'm sure.

Yes.

Does it need to be notarized?

No. Oh, you can even sign electronically.

I didn't know that.

You don't need to. You don't need to print it out. You don't need to waste paper. You don't need to hurt your hand signing.

That's awesome.

Click, click. Make sure you're reading what you're. Click, click, clicking. But you can.

Oh, that's very nice. Cool. Cool.

It's time for your phone.

Can it be terminated?

Yes.

Okay.

Yes. So the purchase agreement can be terminated. There are multiple different reasons why it might be terminated. You know, you might not like the inspection that happened. There might have been something that just didn't sit right with you. That's okay. Just talk to us about it. You. Your financing might not work out. That happens a lot. Not a lot. But, you know, I mean, enough that. That is one of the big reasons behind terminating a contract, the appraisal. Goodness, if it's multifamily, you know, those are hard to appraise.

Yeah.

If for some reason we can't come to an agreement, it can be terminated. That's a condition contingency on the contract. So, yes, it can be terminated. Your earnest money can be refunded to you. We just need to be in communication with you. You need to talk to us about it so that we will sign off on that. We'll get that back to you because I think we talked about it in the vlog. Right. But we're trying to work with our buyers. We're trying to help you. You can help us by, you know, telling us what. Why it's being terminated. We can get you into another property. That's. That's great. But if not, if it's just not for you, just let us know why. So that we can fix it.

Yeah.

You know, because we're. We're just people, too. So we're always trying to improve.

Exactly.

So if there's something we need to fix on our end, then. Then we'll work on it for sure. So just. Yes, it can be terminated. Very, very long story short.

Yes. No. We like good examples, though, too. Does it cost me anything or you anything to either send out the contract, the purchase agreement, or have it terminated or get anything done on it?

No, it doesn't cost anything to send it out or to request it. I mean, it costs us money. Money to use dotloop. I don't even know what that cost is. And it's worth it to us.

It's worth it.

Yeah. So it doesn't cost you anything to request a purchase agreement and to terminate it? No.

Okay, cool, Cool. Do you have any advice or thoughts on the whole topic?

Just when you're requesting a purchase agreement, just. Just be ready to communicate with us. Ask us questions, reach out to us. Review what you're reading or review what you're signing. Read what you're signing. I put two words together. Read what you're signing. Review what you're signing. Know, you know, understand it. Try to understand as many different sections as you can. If this doesn't make sense to you, then ask us what it. What it means, and we'll tell you. And, yeah, if there's anything that was missed, tell me. You know, tell us. If. If we didn't know that you were. You guys worked out something different than what we knew, than what Carla and I knew, then just tell us. You know, we'll talk to our team about it. But yeah, just. Just read what you're signing and really review it. And then once that process starts, you'll be working pretty much exclusively with me and Carla as well. And so you'll just want to stay in communication with us the entire time. Open book communication. That's my biggest thing.

Yes, exactly.

Communicate to everybody in the office. They love it. They love all the time.

It helps everything go through smoother as well. Yeah. And like she was saying, we are an open book. And I feel like this is one topic that I didn't understand until now just because, like, I understand every other part of. Of this company, but the ending part, the. The contract part, the signing it, the. The whole transaction coordinator part, I had no idea what it was. I feel like I learned a lot. Exactly. Exactly. You've been with us for what, four or five years?

Five years.

Yep. You've been doing this whole time?

Yeah.

Yeah.

I don't ever want to change my job.

That's good.

Some people, you know, you want to move up. You want to do. Nope, Nope. Danny keeps trying.

It's a good.

I'm not going anywhere. This is what I'm going to do.

It's a good position. I feel like I learned a lot, too.

I love it. I love getting to work with our investors.

Oh, yeah.

I work with our private money lenders on the other side. FC side. Yeah. I just get to work with different people.

That's fine.

And gosh, I love it.

That's fun. I feel like I learned a lot, so I'm thankful for that. So this was another installment of our freedom podcast, Real Talk for real estate investors. Again, this was number 93. Subscribe. We're on all major streaming platforms, so make sure you subscribe. You can comment. Like it, share it, and we always end these with invest smart, Live happy. Bye, guys.

Bye. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate, financial, or business professional for individualized advice. Opinions and information on this show are not guaranteed. All investment strategies have the potential for profit or loss.