|Essential Contract Clauses Part II
In a previous article, we discussed the
importance of learning to use the "standard" real estate broker contract rather than the
"seminar" contract when dealing with real estate agents.
The following are some essential clauses and modifications I use when selling a property:
Limited Inspection Clause. Most standard broker contract give the buyer the right to
make the contract contingent upon your right to do a thorough inspection before a certain date.
Make certain that the inspection period is short and that the inspection must be done by a licensed
(if they are in your state) professional inspector. Limit objectionable items to roof, plumbing,
electrical heating and structural defects. An open-ended inspection clause will permit the buyer
to "weasel" out of a contract because the garage door squeaks.
Choice of Escrow Company. As the seller, insist on the right to choose the title or
escrow company so that I remain in control. A conservative or uncooperative escrow or title company
can make life very difficult if you are trying to do a creative deal.
Qualification of Buyer. The most important thing to keep in mind when selling is
that time is money! The single biggest mistake sellers make is allowing an unqualified buyer
to tie up their property under contract for two months. Do not believe any claims of the buyer, his
agent or mortgage broker about their ability to qualify for a loan. You should know exactly what
the qualifications are for an FHA or FNMA loan in your area and qualify the buyer yourself.
I use the following clause: "Within 48 hours, buyer shall provide seller with buyers
complete financial and credit information for sellers approval. Within 72 hours after receipt
of such information, Seller may terminate this contract and refund buyers earnest money if,
in sellers sole opinion, buyer does not have the creditworthiness to qualify for a loan from
a third party. Sellers decision and opinion shall be final in this regard, and buyer shall
have no further recourse after return of this earnest money deposit."
NOTE: Be certain you do not engage in illegal discrimination in rejecting a buyer's credit
Permission to Contact the Lender. I hate being in the dark! I always want the have
the ability to control the entire loan process and be able to get information from the lender along
the way. The buyer's lender won't talk to you directly, without express written permission of the
To remedy this problem, insert the following clause: "Buyer hereby gives express permission
to all parties, including lenders, employers, financial institutions, credit agencies, mortgage
brokers and real estate agents to release any appropriate financial information to the
Now you can take control, get on the phone and scream "What's holding up this loan!"
Copyright 1998 All Rights Reserved. No part of this publication may be copied
or reprinted without the express written permission of the Author.
William Bronchick, Esq.
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