Contract on the kitchen table, or come back once title's back?

Question

Sat with an owner at 27 days to the sale, motivated, no hostility, and I had a one page purchase agreement in the folder with a ten day diligence out. I didn't pull it out. Went home, ordered title, and by the time it came back four days later she'd talked to somebody else and wanted 9k more.

So I've been arguing with myself since. The case for signing on the first visit is that the window is fixed, an unsigned deal is an invitation for the next mailer to reprice it, and the diligence period is exactly the tool that lets you sign early and walk if the title is a mess. The case for waiting is that a contract you cancel in week two on a distressed owner is the thing that gets this whole strategy called predatory, and it hands your seller a reason to distrust the next investor. I've also seen people sign, tie the property up, and use the diligence window as free optionality while they shop the assignment, which I don't want to be.

My own diligence spend on these runs 1,200 to 2,600 before I know if it's real, so signing first is also what protects that money.

When does the paper actually get signed.

joe_delgado5 · Answer

First visit. Every time. If I leave a house without paper I assume the deal is gone and I'm usually right, and your 9k is the tuition on that.

The predatory objection is about how you use the out, not whether you have one. Mine is short, seven days, it says in plain language what I'm checking and that she can cancel too, and I read that paragraph out loud before she signs. I have canceled three and each time I called first and explained the lien or the number that killed it. Nobody's ever been angry about that. They get angry when you disappear.

brandonlee36 · Answer

flint's mutual cancellation clause is the part I'd copy. A one way option dressed as a contract is what earns the reputation everybody's worried about.

What form you can hand somebody to sign, and whether you can record anything against the property while it's under contract, varies by state and is worth having an attorney set up once rather than improvising. I'd get the template reviewed and then stop thinking about it.

priya_n21 · Answer

27 days and you spent four of them waiting on title with nothing signed. That's the number I'd look at, compass. Even if you believe in waiting, you didn't have the runway to.

gregpowell66 · Answer

Sign first, but do the scope on the same visit. I walk the mechanicals and the roofline while we're talking, and I can carry a 15 percent contingency on that in my head well enough to name a number I won't have to move. If I need to come back with a plumber before I can price it, that's a deal where I'd rather sign with a longer out and say so.

The repricing risk cuts both ways. Sellers hate a buyer who reduces after signing more than they hate anything else, so whatever you sign at, mean it.

stephen_ok9 · Answer

From where I sit funding these, an unsigned deal isn't a deal I can look at, so signing first is what makes you fundable at all. But 1,200 to 2,600 of diligence spend on a contract with a seven day cancellation is real money at risk in both directions.

What I'd want is a small nonrefundable deposit, a few hundred, released to the seller at signing. It's cheap, it makes the contract mean something to her, and it makes you slower to sign the ones you're not serious about.

aaron_fitz10 · Answer

meridian, doesn't a nonrefundable deposit to a person who's about to lose the house cut against the whole empathy framing? Or is it the opposite, because it's the first actual money anyone has put in front of her. I can argue it both ways and I keep landing wherever I read last.

Contract on the kitchen table, or come back once title's back?

6 replies