Tim Bell Contracts 3

Now, number two, the closing shall take place or closing shall occur on or before a certain date. Now, I like to fill in a date that is 45 days from today's date. You will find that in many markets, it's traditional. Put 30 or something like that. I like 45. Why? As a wholesaler, it gives me more time to find my wholesale buyer. Okay? So I'm going to put a closing date out there about 45 days from today's date. You can see on this particular one, it lists April 18th of 2016. But I'm going to suggest that you fill in a date in there that is 45 days from today's date. So get your calendar, figure out what 45 days from today's date is and put that in as your closing date. Now, notice it says on or before, which means it's a deadline. Okay? Occasionally the. A seller may say, wait a minute, and they're counting out the days, and they're counting on their fingers and their toes and say, wait a minute. That date is 45 days away from today. That's too long. I don't want to wait that long. Okay. Here's how I handle it. You know what, Mr. And Mrs. Seller, I understand that, and I appreciate it. And you know what? I would like to close before 45 days. Also, you have my assurance that I will close as soon as I can prior to that 45 days, if possible. Okay. But remember, this is a deadline. Remember, it says closing shall occur on or before, which means we could do it before that. If I came to you in a couple of weeks and said I was ready to close, would that be okay with you, Mr. And Ms. Seller? Yeah, that's what we want. Great. Then you have my assurance that I will close as quickly as possible. But you have to understand that I'm trying to be honest with you, to tell you that it may take me as much as possible 45 days to close. That's typically how you can explain it. Okay? Now, the third one, buyer reserves the unqualified right to transfer the interest in this agreement to any person or entity at his sole discretion. That's the same as writing in and or assigns. Up at the top, there are some trainers that will teach you to write and or assigns. I find that when I put it in the middle of the contract, I get many fewer discussions, many fewer objections from sellers to the and or assigns clause. This allows me to assign the property to a buyer. And of course, we already talked about one of the exit strategies, our primary exit strategy, our Ideal exit strategy for most properties is an assignment of contract. This particular clause allows us or notifies them that we may be doing that. Okay, now number four, in the event the buyer defaults or does not perform on any provisions agreement for any reason, the seller may retain the earnest money deposit as their sole remedy under this agreement. Now, a lot of people look at that and go, wait a minute, Tim, I don't want to give my earnest money. That's not right. I agree. I don't want to give them the earnest money either. But you have to understand that giving them the earnest money may not be the worst thing that you can do. It may be actually a good recourse for you. Now, I'm going to show you the Tennessee contract. Now, I don't know if you live in Tennessee or not. You probably don't. Statistically, the chances of you living in Tennessee are minuscule. Okay, But I'm not showing you the Tennessee contract so that you can use it or because I think you live in Tennessee or because I think you're ever even going to buy a property in Tennessee. The reason I'm showing you the Tennessee standard state approved contract is because the good folks in Tennessee and their legislature and their attorneys have made the seller's recourse very, very clear if you default. Okay, so let's read what it is. Now, you have to understand, this does not just apply to Tennessee. This applies to everywhere in the United States. This is applicable in every one of the 50 states. It's the law in every state. Now, the reason I show you the Tennessee contract is because the good folks in Tennessee decided to make the law very clear. Other contracts tend to muddle it a little bit. Okay? But this is the law in America. So don't think that you don't have to abide by this or this isn't going to affect you just because you don't live in Tennessee. The truth is this clause reflects the law in the United States of America, which means that your seller in your marketplace would have the same recourse as is listed in this contract. Okay, so let's go over it here. Default or breach. It's section T lines 125, 126 and 127 in the Tennessee contract. Default or breach. If either party fails to perform any obligation under this agreement, the other party may do any or all of the following. Number one, cancel the agreement. Okay, so what? No harm, no foul. We cancel, we walk away. No big deal. But wait, it gets worse. Number two, they can sue you for specific performance. Yeah. They can take you to court and they can say, your honor, Tim said he was going to buy our property, and he didn't buy our property. He defaulted. So we're suing him for specific performance. Now, I'm not an attorney, and I don't even play one on tv, but I will tell you that their recourse for a suit for specific performance would be things like this. They can. The court can order you to sign off on a loan for the property that is otherwise unacceptable to you. So they could force you to sign off and accept that loan such that you could perform on this contract. Yeah. Also, they could force you to use your own money. If they can demonstrate and find that you have the money to pay for the property, they can force you to use that money to enforce this contract and to buy the property. Their third choice would be to force you to liquidate some of your own personal assets such that you can actually afford to close on this contract or this property. Things like your house, your car, your truck, your jet skis, your boat, your firearms, your wedding ring. The court could order you to sell all of those things such that you could have the money to perform on this particular contract. Yeah, Scary. Scary, right? Okay. Or some combination of all three of those things. They could force you to take a loan. They could force you to use some of your own money and force you to liquidate some of your assets for the rest of the money. Again, terrible, right? Yes. But wait, it gets worse. Number three says that they can sue you for actual and compensatory damages. Now, here's an example of how they could prove actual damages. Let's say, for example, you come in and you offer 150,000 on the house. Seller agrees, you sign, they sign. Now you have it under contract. The next day, somebody comes in and says, hey, Mr. Seller, I'll give you 200,000 for your property. Now, the seller, being honest, says, no, I'm sorry. I have it under contract with Tim. But you know what? Let's write a backup offer. And then that way, if Tim doesn't perform on his contract, then I'll call you and you can come pay me the 200,000 for the house. So all they do, they write the backup contract. They. The seller now has a copy of the backup contract. So you go along, you default, you don't buy the property for whatever reason. Okay. Seller calls the second buyer, Bob. Buyer back, and says, hey, Bob, I'm ready to close now. Let's go. Tim didn't Perform on the property. So I'm going to accept the backup offer. And Bob says, oh, shucks, we just bought another property yesterday and we're withdrawing our backup offer. Ah. So here's what could happen. Seller could take that backup offer at $200,000 to court and say, your honor, Tim said he'd pay me $150,000, but he defaulted. Bob said that he'd pay me 200, but. And you can see that's evidenced by his contract that he gave me here, the backup contract that we wrote. But as soon as Tim defaulted, I called Bob back and he withdrew his backup offer because he had bought another property. Yeah. So as a consequence of Tim not performing on his agreement, I'm out the $50,000 extra that I would have gotten from Bob if I'd been available to close with him instead of being contractually obligated to close with Tim, who defaulted and didn't perform. So, your honor, I think that Tim owes me the $50,000 that I would have made if I had, if I had been able to close with Bob. And the judge takes one look at this and says, guilty. And now you've got a judgment against you for $50,000. Yeah, terrible, right? But wait, it gets worse. The other thing they could sell you for, or sue you for, rather, is compensatory damages. Now, compensatory damages, an example of compensatory damages would be the lady who spilled hot coffee on her lap at McDonald's. Okay, if you're not familiar with that story, you can look it up on snopes. But there was a lady, she spilled hot coffee on her lap at McDonald's, and she said the coffee was too hot. Now, she went to the hospital, and her injuries. The bill for her injuries were $800 bandages and, you know, salve and all that kind of stuff. Okay, 800 bucks. She sued McDonald's for $2.6 million. You go, wait a minute. What's the difference between the $800 hospital bill and the 2.7 million dollar lawsuit? Here's what she did. She brought her psychiatrist to court with her, and the psychiatrist said, your honor, my client has suffered irreparable psychological damage by virtue of the fact that she spilled hot coffee on her lap at McDonald's. She can therefore no longer work. We've calculated her lifetime wages at $2.7 million, and that's the basis of our lawsuit. Really? Yeah. True story. Okay, now again, the seller could arbitrarily come up with a dollar amount that they think you owe them in terms of compensatory damages. Okay? So now, please don't let this discussion discourage you from investing in real estate. I don't want that to happen. Okay? But I do want to go back and I do want to read the that clause in our real estate purchase contract, clause number four. And we're going to read it with new eyes now that we have an awareness of what the seller can do. Okay? So let's look at it with a new perspective. In the event the seller defaults, does not perform on any provisions agreement for any reason, the seller may retain the earnest money deposit as their sole remedy. Under this agreement, sole remedy means only choice. Has nothing to do with the part of you that lives after you die or that delicious fish filet of soul. No, in this case, sole remedy means only choice. In other words, if you default for any reason, all the seller can do is keep your earnest money deposit. If you have a $100 earnest money deposit, it's very simple. No Friday night date. That's all it is. No Friday night date. I mean, let's think about it. You go out on a Friday night date, you go to dinner at a moderate place, you go to the movies, you buy some popcorn, a couple of drinks. It's going to be 100 bucks, right? Yeah. Okay, so if you default and you lose the $100 earnest money deposit, which is not absolutely necessary, but could happen, it says the seller may take the earnest money deposit. Okay, if that's the case, then you stay home, your spouse gets the remote, you go fix dinner, and you end up watching a chick flick. So what? Okay, you're out 100 bucks. So again, this dramatically reduces the amount of risk that you have in any transaction.