Real Estate Contracts 101 (Watch Before You Sign Anything)

If you're watching this and you're like, who the heck is this guy? Who's this guy Nathan Payne? And why the heck should I listen to him? Guys, my name is Nathan Payne, also known as Professor Payne. I love teaching and I've done over $2 million in assignment fees and wholesale fees. And here's some of the deals that I've done, just if you don't believe me. All right. Also, I got my degree at BYU-Idaho. Now I didn't get my degree in teaching, but I did get my degree. So I have some authority. I'm not technically a professor, but I believe I have the skills to be a professor. So we're going to be diving into Why I like to teach. If you guys are watching this and you're like, why is this guy teaching all this stuff? Guys, teaching is my passion. I grew up and I wanted to be a teacher when I grew up, but it didn't meet my financial goals. Unfortunately, in the United States, teachers don't make that much money. And I moved to Canada recently. In Canada, teachers can make up to like 6 figures. And obviously they make a lot over here. So, but anyway, I wasn't born in Canada. I just live here now. And that's why I like to teach, because I do real estate and I've done it for several years and I know what works and what doesn't work. It's my passion. And I'm glad that I can combine the two and teach you guys how to do it. So, and these are just a few people, as you guys can see on the screen, that I've worked with over the last couple of years to help them achieve the goals that I've, you know, I've been able to help them. And today we're going to be going directly into answering the question that I get all the time. What the heck is a real estate purchase contract and how do you use it? And how do I navigate the whole thing? That's what we're going to be going over. Now, if you guys are wondering like, why Why is today's lesson even matter— matters? Like, why do I even have to care about this? This one document, if you do not understand how to use this one document, you know, you're not gonna be able to do a lot of deals if you don't know what a real estate purchase contract is, right? So the bonus also is if you stay until the very end of this presentation, guys, I'm gonna give you my very own document that I've had an attorney draft up. I've done hundreds of deals and made million dollars— millions of dollars in transactions off of using this very agreement that I'm just gonna hook you guys up with. All right, so again, if you're like, you You know, is it worth staying to the end? I think it is. Well, that's why I made it, right? But I'm going to hook you guys up with everything that I have. All right. So what the heck is a purchase and sale agreement? Most of you all probably already know what the definition is, but I'm here to teach you guys. Okay. It's a legally binding agreement. That's a document that's outlining the terms of a real estate transaction between a buyer and a seller. It's pretty dang simple. Now, a lot of people think you need like a specific contract. Really, you could even do a deal on a napkin as long as you, you make an agreement and you both sign. But the cool thing about having a contract like I have it, outlines all the things that you need to know so you do deals the right way and you are protected. All right. So why is it important? Well, like I just said, guys, it protects both parties. It secures your deal and ensures clarity, and it's legally required to move forward with the transaction. Okay. So if, again, if you're wondering, why do I need a real estate purchase agreement? That's why. And that's what it is right here. Okay. Now let me tell you about a story. You guys are going to love this story. This is Carl. Carl is one of the clients I work with. Okay, Carl has never done a deal. He's brand new to the industry, and he had a seller that he was talking to that was facing foreclosure. Okay, it was actually on Monday. There was an auction date set for Monday, and the seller didn't do anything to prepare to sell her home. She was just— I don't know what she was thinking. I thought she maybe she just thought everything was going to work out and no one's going to foreclose and take her home. But what Carl did is he said, hey, your auction date's coming up. We can stop the auction day. We can stop the foreclosure from happening, but I need you to sign an agreement for me to buy your house. Obviously, we're going to buy it at a price that makes sense so we can at least get you something so you don't walk away with $0. And the seller signed, right? He signed the agreement, and then it was over the weekend. And then Carl called the attorney, the plaintiff's attorney, the attorney that was doing— performing the foreclosure and getting everything— that was in charge of it. He called them and he said, hey, I have a contract, right? If you guys can see this, I have a contract to purchase this home. I need you to stop the auction date. I need you to stop the auction and the foreclosure from happening. Okay, now Carl, if Carl brand new, if he didn't know how to do this, the lady would have lost her home. She had about $50,000— I'm going to write this down so you guys can see— she had about $57,000 left on her mortgage, and she— her house is probably worth about $225K. That's a big spread, guys. That's a big spread that she was going to lose out on. And Carl saved the day. He stopped the foreclosure. The attorney called him back, said, okay, I looked at your agreement that you signed, you did it the right way, congrats. I'm sure— I don't know if he said congrats, but Carl was able to stop that lady from losing her house. Now he's working with to buy it. Okay, so that is the power of having— knowing how to use the, uh, purchase agreement that we're talking about right now. All right, shout out to Carl. Carl, congratulations, man. I'm really proud of you. Okay, so in this video, I'm going to be going over the key sections of a contract because it's easy for me to tell you that it's like, oh, you need a contract, right? But maybe you don't know how to navigate it. Now, I've had to use— read the contract hundreds of times with sellers to go through with it so they would feel comfortable. I wanted to make sure that they felt good about the decision they're making, and I like to read through contracts with sellers. Not the whole thing, just review it and pass by it, pass over it. I like to do this so people feel, um, comfortable, right? Because I want to eliminate all the issues that they might feel like they're having, any of the roadblocks. I don't want to just send a contract to a seller and then just cross my fingers and hope they sign it or they feel good about it, right? That's just not how I roll. Okay, so let's go over it, because if you've been having this question of like, well, I'd like to understand contracts more, I got your back. Okay, that's what this lesson's for. So when you sign an agreement, key, key sections on this, and I'm going to be going over it more in depth in the next slides, but you want buyer and seller information. Okay, you want to have the purchase, uh, price on there, which is obvious, right? You want the buyer's information. You want to clearly state the agreed amount that you agreed upon. You want to have your contingencies to protect yourself. These are contingencies, and there's going to be more of them. And you also You need the signatures, obviously. If it's not signed, it's not a legit agreement. So that's, that's obvious. All right. So let's go into this portion of the contract so you know what it is. So it's pretty simple. Most contracts will say, especially the one that you guys are going to be getting as I give you this, this contract is made on— that's the date. So today, what is that? Today's 12/20. Merry Christmas, by the way, everybody. Merry Christmas. It's coming up. Okay, love you guys, and I love Jesus. Okay, so, um, this contract is made on the date by and between seller— so let's just call the seller Nate, okay— and whose address is 123 Main Street, right? And/or buyer. And this, by the way, this is and/or assigned, so this is a dead giveaway that the assignable contract, because it says right here and/or assigns. So this would be what we'll call Professor Payne, right? He's the buyer. All right, and whose mailing address, and this would be the address of the LLC, right? Let's say Professor Payne LLC, and this would be your, your registered LLC, or you can just do it in your own name. Okay, wholesaling doesn't have to be complicated or lonely. Join my free Facebook group, Painless Flipping: Wholesaling Real Estate Simplified, where we're building a community of wholesalers crushing their goals. You're going to get access not only to free training but tools and even one-on-one help to land your next deal. The link is in the description, so don't miss out. So purchase price, Okay, so later on in the agreement, you have to put the address of the property. Pretty simple, 123 Main Street. You got to put the purchase price and then any additional terms like, hey, I agree to buy this house, I'm also agreeing to move the seller, whatever terms you want in there, right? I'm giving the seller like a post-possession, letting them stay in the property. You outline, you know, the post-possession terms, the purchase price of $123K, whatever you want. Well, let's put zeros, okay? Next part is contingencies. All right, so understanding these is pretty important. Prorations, that's for taxes. Defects, want to make sure you understand, like, they're disclosing if there's any major defects. No judgments, no liens. When you're going to get possession, it outlines when you're going to have possession of the property. Inspection, this allows you— this says buyer has the rights to inspect the property. Contingencies, this contract is contingent on the buyer having the right to inspect the property. This contingency part is pretty important. I had an attorney draft up mine, like, this section specifically, where where it's very lenient. It's like very skewed over to the buyer where like you can basically bail if you don't like anything about the property. Okay. So this is a good clause that I have, and I'm not trying to get squirrely on anybody, but I like to be protected, right? And the risk of loss, that's like if anything changes in the property after you agree to purchase it, I believe. So acceptance, EMD, and more. I've seen a lot of these companies come out recently. Like, I'm not going to name any names, but they like will lend you earnest money, EMD. Guys, if you know how to wholesale right, you don't need to borrow earnest, you don't need earnest money from anyone. I've used the EMD from my buyer like every time, right? If you have a buyer, you're just going to use their EMD. You don't need to go borrow EMD from someone else. That's actually how I make my offers extremely strong when I'm going against other wholesalers is I say, hey, I can give you like $10K, $15K, $20K EMD down, and then I have my buyer my buyer puts down the EMD. But anyway, I, I haven't put down EMD in a long time. Why? Because my end buyer does it. So acceptance, guys, this is another one we'll get to later on the video. I don't really put an acceptance date because I don't send contracts and just cross my fingers and hope that they'll sign it. I actually do it on the phone with them, or if they don't sign it within like, you know, a day, I call them and say, hey, was there an issue, right? Like, I don't think a deadline is going to make them sign or not. So I actually put N/A because they're either going to sign it on the phone with me or they're not. 'Okay, deposit, you know, I put $100 for EMD.' And a lot of time they're like, 'Well, why are you just putting $100 down?' I just say, 'Hey, look, we're going to buy your house quick, fast, easy, and convenient, so we can put as much money as you want down. But really, it's either we're going to do it or we're not, right? Like putting $5K, $10K, like we have our inspection period, we're going to check everything out. I can put more if you would like, but that's just usually put because I'm going to buy it, right? I'm either going to buy it or I'm not.' And they're usually cool with that. You can put more, it doesn't matter. But, you know, if you do $10 or a dollar, I think that's kind of weak. I've been doing $100 and no problem, right? No one cares. And again, if you're borrowing EMD, like, I think the issue isn't necessarily like the EMD. I think the issue is your credibility. Maybe they don't feel like you're going to get it done, so they want a lot of EMD down. But for me, I put less down. If they got something to say, then I'll say, I put more down. I'm just— that's what we usually do. We have a lot of properties we're buying. We just, you know, closing on or before. So that means if the seller's like, when are you going to close? Say on or before this date, right? So 3 months out, right? You could say, um, so today we're in December, so you could be like 3/20/25, okay? So I'm going to close on or before this date at 5 o'clock, okay? So don't worry, it's going to be on or before. It could be, it could be like 2, 2 weeks from now if you want a quick close. We just put it out further just so we have time. We don't have to redo, you know, sign addendums to the contract and, and keep extending. And if they're like, oh, I want— I don't want to do that, that's fine, whatever you want, you know. Other agreements: buyer agrees to purchase Property as is. Here it is. That's the as-is part of the agreement that makes your purchase, your contract say, hey, I'm buying this. I'm not requiring you to do anything to it. Contract subject to an acceptable appraisal. I never do that. I don't know why that line's in there, but whatever. I keep it in there. Buyer to pay all closing costs. People like that when we say, hey, we'll pay all closing costs. Usually when you purchase property cash or you wholesale it, the end buyer is willing to pay both, uh, both sides of, um, both closing costs. All right, so if you're like, Nate, What makes a contract assignable? Remember we talked about it previously, everybody, that like and/or assigns does it, but we actually have a part in our agreement that it says it like spells it out really like if you read it, there's nothing to like miss. You're not going to miss it, right? It says buyer may assign or otherwise transfer any buyer's rights, title and interest in and to this purchase agreement to a third party without the seller's consent or to novate this agreement with placement agreement with a third party, blah, blah, blah. I'm not going to read the whole thing, but this allows us to do it. 'How do I say this? How do I explain this to someone who's got a problem with this?' Say, 'Look, I have a lot of LLCs. I have partners that I work with. Sometimes I buy it in my LLC, sometimes we sign it to another LLC where they buy it. Either way, we're, we're gonna buy the house for what we agreed upon. No problem.' So there's no— quit tripping about assigning. It's normal. I have like 3 LLCs, maybe even— I think I actually have 4 LLCs. It happens, right? Maybe I don't want to buy it within my LLC. It Like, that's Ventures of Nathan Payne, whatever. I want to buy with Offer On Homes or, or any of the other ones. Okay, that's how I explain it. All right, in the event that the buyer defaults, the remedy is the earnest money. Okay, this is, this is really good. I got this from an attorney, and I'm not an attorney, guys, so like anything you're using from this, like, take it with a grain of salt. Like, I'm not telling you that like this is a perfect agreement or anything. Like, um, this is what I use. So this is what protects you from the seller backing out. It's If a seller signs an agreement and decides they don't want to sell or they want to sell to someone else, this allows you to record a memorandum of contract, enforce your rights and interests to the property. The memorandum is to protect the buyer's interest and enforce its rights to buy the property, right? So we're not in the game of forcing people out of their house, but if they're trying to backdoor and go somewhere else, we're definitely filing an affidavit memorandum and protecting our deal. I have another video on that, and if you're interested in that, just comment and I'll send you the link. Okay, time is of the essence. Marketing. Okay, this— we're telling them, hey, we have the rights to market. If someone's like, well, I don't like that you are going to market the property, you can say, oh, we just use that so we can pre-market the property and we can know like who— the interest level of who's in this property once we fix it or when we rehab it. If they have a problem with that, that's fine. A lot of this is just about just being transparent. If they have questions, just answering it the way it is. Hey, we're flippers, we're always looking to make a profit and looking for the best exit strategy. Buyer's disclosure. This one tells them that you are doing— you're working with them, your goal is to make money on this property. That's what you're saying. So this protects you in the sense that if you're, you know, you make money on a deal and they're like, well, you made money off of me, it's like, yeah, that's what I was in the agreement. You know I'm an investor now. So anyone can sue anyone, all right? Even if you have an agreement, anybody can sue anyone. So this does kind of state that you're a flipper and you're looking to do this for a profit, but But again, nothing really— I wouldn't say nothing really protects you because anyone can sue anybody. All right, I know that might be scary, but that's just how it is. All right, so signatures. I don't have much else to say for signatures other than get the buyer to sign here on the dotted line and the date. You're the buyer, this is you, Professor Payne, and this is the seller, Nathan Payne. Okay, and then the dates and whatever. You, you guys get it, we don't need to go over too much. And if you are wondering what this part of the contract means where it says seller acknowledgment prohibition I'll be honest, I don't know very well. Go ask someone else. When I get to this part, they usually don't have a problem, they just want to sign. Okay, and if they have questions, I just— I think sell acknowledgement, uh, I do know it says basically like you're both agreeing, no one like made you sign the agreement, we both agree. Now if an attorney's watching this, he's like, yo, this dude has no idea what he's talking about, hey, say something, I'd love to learn. Okay, all right, so here's your next step, everybody. Join my free Facebook group called Painless Flipping Wholesaling Real Estate Simplified. If you're ready to take action and close your deals faster, this is where you need to be. You're going be getting live trainings, free resources, and support all along your way. Link is below in the description, so just click it there. And don't stop there— watch the next video here to learn more about wholesaling strategies that will help you get your next deal faster. Click it now and let's keep the momentum going.