| There are a lot of ways to structure a real | | | | way to protect yourself. If you have little earnest |
| estate contract. The focus of this article is on | | | | money at stake, you have little money you can |
| providing you with some helpful clauses and | | | | lose if you default on the deal. I suggest putting a |
| addendums that can be used to minimize risk and | | | | minimum of $10 down as an earnest money |
| maximize profit. | | | | deposit; $100 would be better in the eyes of the |
| Weasel Clauses - You've probably heard this term | | | | law if you ever had to go to court to settle a |
| before. It's associated with a clause that lets a | | | | contract dispute. |
| buyer out of a contract. Regardless of the | | | | However, there is a caveat to this approach. If |
| negative connotation that might be associated | | | | you attempt to default on a contract after your |
| with them in some circles, a good weasel clause is | | | | inspection period has expired, unless you have |
| essential to structuring a risk-free contract as a | | | | another weasel clause in the contract, you could |
| buyer. | | | | be liable to the seller through a remedy known as |
| One of my favorites to use is "contract subject | | | | specific performance. Essentially, this doctrine |
| to approval of buyer's partner". Your partner does | | | | enables a seller to take a buyer to court to |
| not have to be named in the contract and could | | | | enforce the terms of the contract, i.e. the buyer |
| be anyone (or anything, if it's an entity like a | | | | has to purchase the property, whether he/she |
| corporation). If after doing your due diligence on a | | | | wants to or not. In order to prevent this from |
| deal (or trying to quick turn it if you're | | | | happening, you'll need a liquidated damages clause |
| wholesaling), you determine it's not really a deal | | | | in the contract. For example, "earnest money shall |
| for you, simply exercise this clause at any point | | | | be forfeited as total liquidated damages upon |
| prior to closing. As long as your earnest money | | | | buyer default. This shall be the sole remedy |
| has been placed at a title company/attorney of | | | | without further recourse between the parties." |
| your choice, you should be able to get this money | | | | What that means is that if the buyer defaults and |
| back. | | | | no weasel clause applies, the seller's only recourse |
| Sometimes, you might feel uncomfortable | | | | is to keep the earnest money deposit; specific |
| incorporating such a strong pro-buyer clause in the | | | | performance is not an option for the seller here. |
| contract. Another way to protect yourself with a | | | | DISCLAIMER: This article is not intended to be |
| clause that is a little less slanted in the buyer's | | | | legal advice, but rather an overview that provides |
| favor is to limit your "free look" period to the | | | | the reader with some general ideas of how to |
| inspection period. For example, you might state | | | | protect him- or herself in a real estate contract. |
| "agreement is subject to the final inspection and | | | | Always consult an attorney in your area regarding |
| approval of the property by the buyer 14 days | | | | your specific situation and the best way to |
| after effective date." | | | | structure your contracts. |
| Using a small earnest money deposit is another | | | | |