Professional Documents
Culture Documents
This publication is designed to provide accurate and authoritative information in regard to the subject matter
covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting or
other professional service. If legal or other expert assistance is required, the services of a competent
professional should be sought.
1.
Set goals
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Be organized Be prepared
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Call 10 to 20 sellers
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Attend an auction
25.
Introduction
Real estate is an outstanding investment, one that historically has increased in value more than the
rate of inflation. Real estate also provides numerous tax benefits, a good source of cash flow and a
tax shelter through depreciation. As long as inflation eats up the purchasing power of the dollar,
people will continue to invest in real estate as a hedge against inflation. This phenomena, coupled
with an ever-increasing population, will add to the future demand for real estate.
You have made a wise decision in purchasing this program. Our real estate program contains
powerful, proven strategies and resource material designed to give you the experience of seasoned
real estate investors. This booklet, 25 Steps to Becoming a Successful Real Estate Investor, will
help jump-start your venture into real estate investing and guide you in the right direction using a
simple step-by-step approach. Completing each of the steps will put you well on your way to
financial success through real estate investing.
Take advantage of our consulting program. Our consultants are real estate professionals with years
of experience conducting real estate transactions. Tap into their experience and expertise.
Its now time to embark on a new and exciting journey to achieve your financial goals through real
estate investing. We are proud that you have chosen our real estate investing program to guide you
down the road to financial freedom. There will be many forks and curvesperhaps even some
potholes along the waybut if you review our material on a regular basis and work with our
consultants, you will be well on your way to success.
We wish you the best in your journey to reach your financial goals through real estate investing and
look forward to receiving your personal success stories.
Lets get started!
James J. Francis
Goals
The first step is to define your motivations for wanting to become involved in real estate investing.
Are you looking to create long-term investments? Do you want to become financially independent?
Are you going to work on this part-time until you can replace or surpass your present level of
income or are you going to jump into this full-time? Whatever your aspirations, you will need to
establish a clear-cut direction to achieve your objectives through the use of goals.
Goals are milestones on the road to accomplishment. Studies have shown that the most successful
people are the ones who have clearly defined goals with detailed action plans. Written goals are a
powerful means of reaching personal dreams. Your success is actually the progressive, timely
achievement of your stated goals.
Defining what you are after is 50% of the battle. Before you proceed any further with this program,
sit down and take the time to list what your goals in real estate are going to be, using the forms
provided. The more specific your goal, the more quickly you will be able to identify, locate, create,
and implement the use of the necessary resources for its achievement. Always focus on the results
you want to achieve, not the process. Focusing on the results helps to create your road map.
To be effective, goals must be SMART:
Specific:
I want to be successful in real estate is a wish, not a goal. For it to be a goal, you
must define exactly what successful is for you.
Measurable:
days.
Action-Oriented:
establish momentum.
Realistic:
Goals must stretch you out of your comfort zone, but not be
unrealistic.
Timely:
Target completion dates should be included with every goal statement. I will
complete_________ by January 1, 2002.
In the space provided, write down two or three of your real estate investing goals. Then create an
action plan by listing specific steps that will need to be completed in order for you to reach those
goals. For example:
Goal: I will purchase my first FSBO (For Sale by Owner) investment property
Target Completion Date: Two months from todays date
Action Steps:
1. I will identify 50 potential FSBO properties from newspaper classified ads.
2. Before the weekend, I will narrow the list by half using the ABC rating system I learned in the
25 Steps to Becoming a Successful Real Estate Investor guide.
3. I will contact 20 FSBO owners by phone this week.
Real Estate Goals
Goal: __________________________________________________________________
Target Completion Date: ___________________________________________________
Action Steps:
1. __________________________________________________________________
2. __________________________________________________________________
3. __________________________________________________________________
Goal: __________________________________________________________________
Target Completion Date: ___________________________________________________
Action Steps:
1. __________________________________________________________________
2. __________________________________________________________________
3. __________________________________________________________________
Goal: __________________________________________________________________
Target Completion Date: ___________________________________________________
Action Steps:
1. __________________________________________________________________
2. __________________________________________________________________
3. __________________________________________________________________
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The speed with which you are able to achieve your goals is directly related to how clearly and how
often you are able to visualize your goals. Your subconscious mind works to make your mental
pictures consistent with the outer world. You move toward the things you think about, whether you
want to or not. Your outward thought process directly affects your outward reality.
Visualization is the process of creating a mental picture of what you want to happen as if it has
already happened. Visualizing a goal is like giving a direct order to your mind to apply its full
power to the goals accomplishment. The greater the detail and clarity of your thought pictures and
the more often you picture what you want, the more quickly you are likely to see results and to
overcome the apparent obstacles between where you are and where you want to be.
To help you see success, place your Top-10 Goals where you will see them every day. Make
visualizing your goals a regular habit.
10-10-10 Rule
Avoid putting more than 10% down on a property. Use the power of leverage by using other
peoples money so you can tie up as many properties as you can with the least investment possible.
Avoid getting involved with a property that has more than a 10% annual interest rate. In the long
run, this interest rate can diminish your overall return on investment.
Purchase properties you plan to hold or renovate a minimum of 10% below fair market value, not
the listing price.
Where Do I Start?
Most first-time real estate investors begin by acquiring single-family homes or duplexes. Strategies
for investing in commercial properties or apartment complexes will be discussed later in this
material. One of the best ways to discover good real estate deals for single-family homes and
duplexes is to review the classified ads in your local newspaper. The majority of real estate
classifieds are placed in the Saturday or Sunday editions. When you review the ads, you will need to
have several colored pens or markers on hand to circle the ads you want to call.
Coding Ads: A, B or C
When you find ads with these words in them, circle them. Then use an A, B, or C rating system.
The ads that show the most motivation (those having multiple words from the above list) mark with
an A, those with less motivation get a B and those with just some motivation rate a C. You
will use these markings to determine which ads you should call first.
Stay away from ads that are long and flowery, ads that describe amenities, location or great views.
These people are trying to sell their property at the full market value and probably have no intention
of entertaining a low offer from you.
You will often find that short, concise ads lead to good deals. Usually these are FSBOs (For Sale by
Owner), and the brevity of the ad indicates that the owner has little or no extra money.
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market that you can use for future evaluations. Work smarter, not harder, is one of the credos you
should learn to live by!
Get Organized
Now is the time to get your home office and systems organized. Before you start following up on
the real estate ads or contacting owners from properties you identified during your neighborhood
drive-throughs, make sure your home office will accommodate your present and future needs.
Below is an outline of some basic items:
A desk, reading lamp and a comfortable chair (because you will hopefully be spending a good deal
of time establishing your real estate business).
A phone line dedicated solely to your real estate business with an answering machine or a voice
mailbox with remote access.
A two or four-drawer file cabinet with hanging folders and plenty of files (legal size is preferred
because most contracts come on legal-sized paper).
A financial calculator. This will be a necessity when you are negotiating with sellers and need to
know how to change the terms of the deal to fit the needs of the seller. You can buy one of these
calculators for less than $50.
If you have sufficient capital, you will want to add a computer, a fax machine, and a copier to your
office. If you do not have the capital to buy these initially, go back and add them to your goals list.
Even though you may start out in real estate investing working part-time out of your house, it is
important that you create a professional image. When dealing with homeowners of FSBO
properties, an image of experience and professionalism may give you negotiating leverage. Your
appraisal of the homeowners property or offer will tend to have more credibility if conveyed
through a professional image.
So how do you project the persona of the experienced real estate investor when you are working at
it five to 10 hours a week in the extra bedroom in your house? One important means is through
having professional-looking stationery and business cards. Although most seasoned real estate
investors prefer to maintain a low profile, business cards for the beginning real estate investor can
be a valuable tool. Your business card can provide information on how to contact you, can keep
your name prominent in the minds of homeowners with whom you have spoken and can be
distributed to friends, relatives and business associates for future leads and referrals.
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Telephone Scripts
If you were to visit all the properties available in your market, it would take forever. A quick
telephone survey and a record form are your best tools to maximize your time and effort. Below
you will find sample survey scripts and questions you should ask to get the ball rolling.
Script #1
Hi, my name is ____________________. I am a real estate investor and would like to discuss
your property for sale. Is now a good time? (If not, schedule a time to call back.) Im looking at
several properties and just need to take a few minutes to see if your property would be of interest to
me. If it is, I would put an offer on it within 24 hours.
Script #2
I am a cash investor. I try to solve the problems that many sellers face. Maybe I can be of help to
you, too? Is now a good time? (If not, schedule a time to call back.)
The inactivity of real estate agents usually causes longer selling times for a house selling time
that could drag on for months or even years. A prospective buyer would most likely have to qualify
for a loan. As time goes on, it could cost you a lot of money to keep paying the mortgage and
because of real estate commissions, you end up getting less for your property than you should.
With Realtor commissions and closing costs your total expenses can add up to more than 15% of
your asking price. For the right price, I will pay you cash and offer a quick closing for your
property.
Do you feel that we can work together?
(Common Concerns)
If the homeowner does not want to discuss the information:
I dont want to waste your time or mine and Id like to put an offer on the property as soon as
possible.
This is a common discussion in the sale of a property . . . (ask next question).
If the homeowner wants you to see the property:
I would love to after I get the answers to a few more questions.
If you are dealing with a FSBO (For Sale By Owner), you will need a Contract or Agreement of
Sale template on which to write up your offer. Most people are intimidated by contracts, particularly
when it comes to real estate. You will want to present a user-friendly, professional-looking
document that solidifies and formalizes the verbal agreement. Consider having an attorney familiar
with real estate law prepare a user-friendly form for you. Make sure that any form you use includes
these specific items:
Legal description
Purchase price and method of payment
Time for acceptance and effective date
Title evidence
Closing date
Occupancy on or before date of closing
Assignability
Deposit of receipt
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Many transactions require additional conditions and terms not included in your basic forms. Extra
information, conditions and terms are agreed to by adding a sheet of paper to the contract called an
Addendum. In the original agreement, contract or offer you may see a note on the contract, See
Addendum. The Addendum can include one clause or many. In fact, it is not uncommon to see an
original typed section crossed out (line through the text) and a note saying See Addendum. This
gives the contract flexibility so you can add clauses, terms and conditions to the document. Often
you will see such a statement on the Addendum:
Terms and Conditions: The terms and conditions of this Addendum prevail in the event of a
conflict with the terms and conditions of the attached Agreement of Sale.
This allows individuals to essentially negate information contained in the original document,
thereby changing the conditions and terms. An Addendum can be very powerful. A well-written
Addendum can provide you with an escape clause, stricter financing conditions, additional rights,
less liability, liquidated damages and even more negotiation power.
Your assignment in this step is to become familiar with real estate contracts and agreements.
Included in this section you will find a Contract for Purchase and Sale form (Buyers version). The
annotations below are numbered to correspond with specific sections of the contract and are
designed to help explain portions of the contract or the information requested. If you have
additional questions, call your consultant or seek the advice of a professional in your area.
1.
Seller: The sellers name would be indicated in this section. If the property is held by more
than one party, both names would be included. For example, a husband and wifes names would be
included as John Smith & Mary Smith as Seller.
2.
Buyer: The individuals or entities buying the property would have their names here. You
may want to include after your name and/or assigns. This will allow you some additional rights of
assignment of the agreement.
3.
Legal description: The legal description of the property is not the address, but the legal
description as recorded at the county courthouse. Typically it looks like this: Lot 208, Plan 4539,
City of Orlando. If the information is not immediately available, it is common to include in this
section To be supplied at closing or legal description to follow. You can get the legal
description from the courthouse, from the homeowners document of purchase or from the title
company handling the closing.
4.
& 5. Street address: The exact address of the property.
6.
Items included: You can ask for any items that are in the property but not affixed to it which
may be included in the purchase agreement, such as stoves, refrigerators, washers, dryers, curtains,
pool or patio furniture. These items and their inclusion are negotiable.
7.
Purchase price: The purchase price of the property.
8.
Deposit to be held: The funds you deposit as earnest money can be held by anyone. Often
the seller will want to hold the funds, but you can insist on your accountant, a title company, or
attorney to hold the funds.
9.
Amount: The exact amount of money you will deposit with the escrow agent. Obviously you
want to make this amount as small as possible, so as to not tie up your funds. Again, this is
negotiable. The normal deposit is 5% of the purchase price but should never exceed $5,000.
10.
Promissory Note: If you need additional funds to secure the property, you may want to
consider giving a promissory note to the seller as an alternative to putting more cash down. The
note is also an agreement that can be held by the escrow agent. If the mortgage is assumable, use the
Payment section b (11-14).
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11.
Assumption of Mortgage: In this space indicate the party to assume the mortgage.
12.
Interest rate: List the interest rate of the mortgage to be assumed.
13.
Principal and Interest: Include the actual amount of the monthly payment that includes the
principal and interest payment. The homeowner should be able to provide this information from
their mortgage payment stubs.
14.
Approximate balance: The balance of the mortgage amount should be listed in this section.
The property owner may know the amount or they may have to call the mortgage company to find
out the balance owed. The exact amount is not totally necessary because it will most likely change
prior to closing, because the homeowner will make additional payments prior to closing.
15.
Purchase Money Mortgage: This is additional financing of the property which is held by the
seller. List the interest rate for the mortgage.
16.
Amount: Spell out the amount to be financed through purchase money mortgage.
Note other: You do not have to focus just on cash instruments to purchase a property. More than
one home has been purchased through trade of goods, services and other property. You would
include these other forms of payment in this section.
17.
Balance at close: Any cash to be transferred to the seller at closing should be specified here.
Hopefully if you have done your negotiation well this will be none or even a rebate.
7. Total: The total should be the same as the purchase price. The Payment sections must add up to
the purchase price.
Financing: If any of the payment is to be financed by a third party the specifics of the financing and
details are spelled out in 18, 19 and 23. If the financing is not met within the time frame outlined,
the contract is null and void.
18.
Interest rate: Indicate the maximum interest rate that you would accept.
19.
Years: For what period of time (repayment period) shall the note/mortgage be held?
20.
On or Before: Do not leave your offers open. Set a specific period of time that the offer is
valid and after which it is void. A period of 24, 48, or 72 hours is not considered unreasonable.
Usually you would put on or before January 1,1996 at 3:00 p.m. Create a sense of urgency if you
can, but realize you can always extend the offer or make another offer later.
21.
& 22. Closing day, month & year: Specify the closing date. Typically it takes 60 to 90 days
to close on a property. Depending on what you want to do with the property, it may be shorter or
longer.
Restrictions, Easements, Limitations: If there are any restrictions on the property they would be
identified in this section as other. In very few cases are there restrictions but they do happen
occasionally. The purpose of the property is often residential.
Text: The balance of the contract/agreement is a template of standard clauses and terms to protect
the buyer. Go through the contract and become familiar with the terminology and specific clauses.
This sample contract definitely favors the buyer.
If you use a sellers contract, realize that the contract may be structured to protect the seller, not
you, the buyer. Review contracts in detail. When it is time to sell the property you will want to use a
different contract, one that favors the seller of the property (you).
Acquiring Approvals: Specifies the exact nature of the use of the property. It is usually residential
but may be for rental or some other objective. Provides another measure of security that you can get
out of the contract if these conditions are not met.
Special Clauses: This section is where you may have added clauses to the contract. Most of the time
you will find Subject to addendum or See addendum.
Witnesses & Execution: The buyers and sellers signatures must be included to approve the
agreement. If there is more than one owner, get both signatures. Also, the signature of the escrow
agent for the deposit must be included (this could be the seller or whomever receives the escrow
deposit).
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Brokerage Fee: A detailed breakdown and obligation of the brokerage fees to be paid to a broker
can be part of the contract (if you are using a broker). Include this paragraph if appropriate.
Addendum: This is your opportunity to add as many clauses to the contract as you would like to
serve as a guide for the asset transfer. Spell out the specifics of the negotiation and agreement in the
addendum. Make sure you have escape clauses in case you cannot purchase the property or cannot
find another buyer in time. Ask for more concessions.
After you have completed the contract and addendum, fax it to your consultant for review. This is
essential! Especially in the beginning, you should not present a contract without first discussing it
with your consultant. Your consultant will recommend any changes to make your contract stronger,
and will answer any questions you may have.
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e)
Show all dedicated public streets provided access and whether such access is paved to the
property line; and
f)
Show the location of any easements necessary for the furnishing of off-site improvements;
and
g)
Be certified to the Seller, the Buyer, the Title Company and any lender that may be involved
in the transaction.
In the event the survey or the recertification thereof shows any encroachments of any improvements
upon, from, or onto the Property, or on or between any building set-back line, a property line, or any
easement, except those acceptable to Buyer, in Buyers sole discretion, said encroachment shall be
treated in the same manner as a title defect under the procedure set forth of notice thereof with seller
to pay cost of correction.
XV. TERMITES: The Buyer, within time allowed for delivery of evidence of title and
examination thereof, or no later than ten days prior to closing, whichever date occurs last, may have
the improvements inspected at Buyers expense by a certified pest control operator to determine
whether there is any visible active termite infestation or visible existing damage from termite
infestation in the improvements. If Buyer is informed of either or both of the foregoing, Buyer will
have ten days from date of notice thereof within which to have all damages, whether visible or not,
inspected and estimated by a licensed building or general contractor. Seller shall pay valid costs for
treatment and repair of all damage up to 1 % of Purchase Price. Should such costs exceed that
amount, Buyer shall have the option of canceling Contract within five days after receipt of
contractors repair estimate by giving written notice to Seller, or Buyer may elect to proceed with
the transaction, in which event Buyer shall receive a credit at closing of an amount equal to 1 % of
said Purchase Price. <Termites> shall be deemed to include all wood destroying organisms.
XVI. INGRESS AND EGRESS: Seller warrants that there is ingress and egress to the Property
sufficient for the intended use as described in Paragraph Vll hereof the title to which is in
accordance with Paragraph Xl above.
XVII. LEASES: Seller shall, not less than fifteen days prior to closing, furnish to Buyer copies of
all written leases and estoppel letters from each tenant (if any) specifying the nature and duration of
said tenants occupancy, rental rates and advanced rent and security deposits paid by tenant. In the
event Seller is unable to obtain such letter from each tenant, the same information shall be furnished
by Seller to Buyer within said time period in the form of a Sellers affidavit, and Buyer may
thereafter contact tenants to confirm such information. Seller shall deliver and assign all original,
leases to Buyer at closing.
XVIII. LIENS: Seller shall, both as to the Property and personally being sold hereunder, furnish to
Buyer at time of closing an affidavit attesting to the absence, unless otherwise provided for herein,
of any financing statements, claims of lien or potential lienors known to Seller and further attesting
that there have been no improvements to the Property for ninety days immediately preceding date of
closing. If the property has been improved within said time, Seller shall deliver releases or waivers
of all mechanics liens, executed by general contractors, subcontractors, suppliers, and materialmen,
in addition to Sellers lien affidavit setting forth the names of all such general contractors,
subcontractors, suppliers and materialmen and further reciting that, in fact, all bills for work to the
Property which could serve as a basis for a mechanics lien have been paid or will be paid at closing
XIX. PLACE OF CLOSING: Closing shall be held in the county wherein the Property is located,
at the office of the attorney or other closing agent designated by Buyer; provided, however, that if a
portion of the purchase price is to be derived from an institutional mortgagee, the requirements of
said mortgagee as to time of day, place and procedures for closing, and for disbursement of
mortgage process, shall control, anything in this contract to the contrary notwithstanding.
XX. TIME: Time is of the essence of this Contract. Any reference herein to time periods of less
than six days shall in the computation thereof, exclude Saturdays, Sundays and legal holidays, and
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any time period provided for herein which shall end on a Saturday, Sunday or legal holiday shall
extend to 5:00 p.m. of the next business day.
XXI. DOCUMENTS FOR CLOSING: Seller shall furnish, at his(her) cost, the deed, closing
statement, mechanics lien affidavit, assignments of leases, and any corrective instruments that may
be required in connection with perfecting the title. Buyer shall furnish mortgage, mortgage note,
security agreement, and financing statement.
XXII. EXPENSES: State documentary stamps which are required to be affixed to the instrument of
conveyance, intangible tax on and recording of purchase money mortgage to Seller, and cost of
recording any corrective instruments shall be paid by Seller. Documentary stamps to be affixed to
the note or notes secured by the purchase money mortgage, cost of recording the deed and financing
statements shall be paid by Buyer.
XXIII. PRORATION OF TAXES: Taxes for the year of the closing shall be prorated to the date of
closing. If the closing shall occur before the tax rate is fixed for the then current year, the
apportionment of taxes shall be upon the basis of the tax rate of the preceding year applied to the
latest assessed valuation. Subsequent to the closing, when the tax rate is fixed for the year in which
the closing occurs, Seller and Buyer agree to adjust the proration of taxes and, if necessary, to
refund or pay, as the case may be, an amount necessary to effect such adjustments. This provision
shall survive closing.
XXIV. PERSONAL PROPERTY INSPECTION, REPAIR: Seller warrants that all major
appliances, heating, cooling, electrical, plumbing systems, and machinery are in good working order
and free of any defects. Said warranty shall survive the closing.
XXV. RISK OF LOSS: If the improvements are damaged by fire or other casualty prior to closing,
and the costs of restoring same does not exceed 3% of the assessed valuation of the improvements
so damaged, cost of restoration shall be an obligation of the Seller and closing shall proceed
pursuant to the terms of Contract with costs therefor escrowed at closing. In the event the cost of
repair or restoration exceeds 3% of the assessed valuation of the improvements so damaged, Buyer
shall have the option of either taking the Property as is, together with either the said 3% or any
insurance proceeds payable by virtue of such loss or damage, or of canceling the Contract and
receiving return of deposit(s) made hereunder.
XXVI. MAINTENANCE: Notwithstanding the provisions of Paragraph XXIV, between Effective
Date and Closing Date, all personal property on the premises and real property, including lawn,
shrubbery and pool, if any, shall be maintained by Seller in the condition they existed as of
Effective Date, ordinary wear and tear excepted, and Buyer or Buyers designee will be permitted
access for inspection prior to closing in order to confirm compliance with this standard.
XXVII.
PROCEEDS OF SALE AND CLOSING PROCEDURE: The deed shall be recorded
upon clearance of funds and evidence of title continued at Buyers expense, to show title in Buyer,
without any encumbrances or change which would render Sellers title unmarketable from the date
of the last evidence, and the cash proceeds of sale shall be held in escrow by Sellers attorney or by
such other escrow agent as may be mutually agreed upon for a period of not longer than five days
from and after closing date. If Sellers title is rendered unmarketable, Buyer shall within said five
day period, notify Seller in writing of the defect and Seller shall have thirty days from date of
receipt of such notification to cure said defect. In the event Seller fails to timely cure said defect, all
monies paid hereunder shall, upon written demand therefor and within five days thereafter, be
returned to Buyer and, simultaneously with such repayment, Buyer shall vacate the Property and
reconvey same to the Seller by special warranty deed. In the event Buyer fails to make timely
demand for refund, he shall take title as is, waiving all rights against Seller as to such intervening
defect except as may be available to Buyer by virtue of warranties, if any, contained in deed.
XXVIII.
ESCROW: Any escrow agent receiving funds is authorized and agrees by acceptance
thereof to promptly deposit and to hold same in escrow and to disburse same subject to clearance
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thereof in accordance with terms and conditions of Contract. Failure of clearance of funds shall not
excuse performance by the Buyer.
XXIX. ATTORNEY FEES AND COSTS: In connection with any litigation including appellate
proceedings arising out of this Contract, the prevailing party shall be entitled to recover reasonable
attorneys fees and costs.
XXX.(a) DEFAULT BY SELLER: In the event that Seller should fail to consummate the
transaction contemplated herein for any reason, except Buyers default; (i) Buyer may enforce
specific performance of this Agreement in a court of competent jurisdiction and in such action shall
have the right to recover damages suffered by Buyer by reason of the delay in the acquisition of the
Property, or (ii) may bring suit for damages for breach of this Agreement, in which event, the
deposit made hereunder shall be forthwith returned to Buyer, or (iii) declare a default, demand and
receive the return of the deposit. All rights, powers, options or remedies afforded to Buyer either
hereunder or by law shall be cumulative and not alternative and the exercise of one right, power,
option or remedy shall not bar other rights, powers, options or remedies allowed herein or by law.
XXX.(b) DEFAULT BY BUYER: In the event Buyer should fail to consummate the transaction
contemplated herein for any reason, except default by Seller or the failure of Seller to satisfy any of
the conditions to Buyers obligations, as set forth herein, Seller shall be entitled to retain the earnest
money deposit, such sum being agreed upon as liquidated damages for the failure of Buyer to
perform the duties and obligations imposed upon it by the terms and provisions of this Agreement
and because of the difficulty, inconvenience and uncertainty of ascertaining actual damages, and no
other damages, rights or remedies shall in any case be collectible, enforceable or available to Seller
other than as provided in this Section, and Seller agrees to accept and take said deposit as Sellers
total damages and relief hereunder in such event.
XXXI. MEMORANDUM OF CONTRACT RECORDABLE, PERSONS BOUND AND NOTICE:
Upon the expiration of the inspection period described in paragraph XXXVI, if Buyer has elected to
proceed with purchase of the property, the parties shall cause to be recorded, at Buyers option and
expense, in the public records of the county in which the property is located, an executed
Memorandum of Contract as attached hereto. This Contract shall bind and inure to the benefit of the
Parties hereto and their successors in interest. Whenever the context permits, singular shall include
plural and one gender shall include all Notice given by or to the attorney for either party shall be as
effective as if given by or to said party.
XXXII.
PRORATIONS AND INSURANCE: Taxes, assessments, rent, interest, insurance
and other expenses and revenue of the Property shall be prorated as of date of closing. Buyer shall
have the option of taking over any existing policies of insurance on the Property, if assumable, in
which event premiums shall be prorated. The cash at closing shall be increased or decreased as may
be required by said prorations. All references in Contract to prorations as of date of closing will be
deemed <date of occupancy> if occupancy occurs prior to closing, unless otherwise provided for
herein.
XXXIII.
CONVEYANCE: Seller shall convey title to the Property by statutory warranty deed
subject only to matters contained in Paragraph Vll hereof and those otherwise accepted by Buyer.
Personal property shall, at the request of Buyer, be conveyed by an absolute bill of sale with
warranty of title, subject to such liens as may be otherwise provided for herein.
XXXIV.
UTILITIES: Seller shall, at no expense to Seller, actively work with Buyer to assist
Buyer in obtaining electricity, water, sewage, storm drainage, and other utility services for
development of the Property.
XXXV.
ENGINEERING PLANS AND STUDIES: Upon the execution hereof, Seller shall
furnish to Buyer all engineering plans, drawings, surveys, artists renderings and economic and
financial studies which Seller has, if any, relating to the Property, and all such information may be
used by Buyer in such manner as it desires; provided that in the event Buyer fails to purchase the
21
Property for any reason other than Sellers default, all such information shall be returned to Seller
together with any information that Purchaser may have compiled with respect to the Property.
XXXVI.
INSPECTION OF PROPERTY: Buyer shall have sixty (60) days from the date
hereof to determine the elevation, grade, and topography of the Property and to conduct engineering
and soil boring tests as the Buyer deems necessary in order to determine the usability of the
Property. Buyer may in its sole and absolute discretion, give notice of termination of this
Agreement at any time prior to the expiration of the sixty day inspection period, and upon such
termination, all deposits held in escrow shall be returned to Buyer.
XXXVII.
PENDING LITIGATION: Seller warrants and represents that there are no legal
actions, suits or other legal or administrative proceedings, including cases, pending or threatened or
similar proceedings affecting the Property or any portion thereof, nor has Seller knowledge that any
such action is presently contemplated which might or does affect the conveyance contemplated
hereunder.
XXXVIII.
SURVIVAL OF REPRESENTATIONS AND WARRANTIES: The representations
and warranties set forth in this Contract shall be continuing and shall be true and correct on and as
of the closing date with the same force and effect as if made at that time, and all of such
representations and warranties shall survive the closing and shall not be affected by any
investigation, verification or approval by any party hereto or by anyone on behalf of any party
hereto.
XXXIX.
ACQUIRING APPROVALS: The obligation of Buyer to close is conditioned upon
Buyers having acquired all the necessary approvals and permits to use the property for
______________________________________________________________________________
XL. OTHER AGREEMENTS: No prior or present agreements or representations shall be
binding upon any of the Parties hereto unless incorporated in this Contract. No modification or
change in this Contract shall be valid or binding upon the Parties unless in writing, executed by the
Parties to be bound thereby.
XLI. SPECIAL CLAUSES:
Witnesses Executed by Buyer on: ______________
Buyer
Buyer
Executed by Seller on:__________
Seller
Seller
Deposit(s) under II(a) received, if check, subject to clearance, and terms hereof are accepted. By
___________________________________________ (Escrow Agent)
BROKERAGE FEE: Seller agrees to pay the registered real estate Broker named below, at time of
closing, from the disbursements of the proceeds of sale, compensation in the total amount of
___________% of gross purchase price of $ __________________ for his services in effecting the
sale by finding a Buyer, ready, willing and able to purchase pursuant to the foregoing Contract. In
the event Buyer fails to perform and deposit(s) is retained, 50% thereof, but not exceeding the
Brokers fee computed, shall be paid to the Broker as full consideration for Brokers services
including costs expended by Broker, and the balance shall be paid to Seller. If the transaction shall
not be closed because of refusal or failure of Seller to perform, the Seller shall pay said fee in full to
Broker on demand. Seller agrees to indemnify, defend and hold Buyer harmless from and against
all claims or demands with respect to any brokerage fees or agents commissions or other
compensation asserted by any person or entity in connection with this agreement or the transaction
contemplated herein.
Broker Seller: ______________________________ Seller: ____________________________
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Calling Sellers
We initially said that you should not call any ads that are long and flowery and contained
descriptions of the amenities of the property. However, to build your confidence in talking to
sellers, we recommend that you begin your calls to sellers by calling about these ads. There is no
pressure because you know you are most likely not going to proceed with the transaction. This is
valuable experience in honing your skills.
After you have experienced a few calls, start calling the sellers who have some motivation. Use the
ABC rating system to arrive at a priority system. Call those with the letter A first, those with a
B second, and, if you have time, those with a C. You should call at least 10 Sellers to complete
this exercise. When you have completed this, review the Real Estate Information Sheets that you
have filled in, and pick out the three best potential deals. Identify why you think they are the best. Is
it the price, the terms, or a combination of the two?
In a number of cases we suggest that you work with the owner directly. The key reasons to do your
own negotiations are to ensure that you are represented correctly and to reduce the cost of the
transaction. However, Realtors can be a great asset if they understand what you are looking for and
are prepared to work with you in the acquisition of the property. Spend time finding a good and
flexible Realtor or title company that understands your plan and is prepared to work with you.
Make them part of your team. They can be a key to your success.
Inspect Properties
Personally inspecting a property is not meant to replace an inspection by a certified inspector. The
professional inspection report will be part of your offer should you decide to proceed, so use your
visit to the property as a means of negotiating a better price with the seller.
After determining that you want to pursue a property, call the seller back and set up a time to view
the house. Arrive at the appointment on time, but not early. You do not want to appear too anxious
to see the property. Take a clipboard, note pad, pen, flashlight, marble and tape measure along with
you. These will be very valuable in providing you with support for your offer.
Use the visit to do three things: to find any problems with the house, to let the seller know you see
the problems and to get to know the seller. It is much easier to assess the sellers motivation and
learn personal information when you are face-to-face with a person. Ask good questions and make
sure you are a great listener. Many times, you can gather facts from the visit that will help you put
the deal together, facts that you would never have gotten over the phone.
Remember, like so many other encounters you have in life, this is a sales situation. Take advantage
of it! Establish a relationship with the seller that will put you above any other buyers. It is not
24
unusual for one of our members to close a deal and tell us that the seller said to him/her, I would
not have accepted this offer from anyone else, but you seem like the type of person who will take
care of our property. You listened to our situation and structured an offer that would take care of all
of our needs. This is a WIN-WIN situation, and it works!
Write an Offer
You now have gathered enough information to sit down and determine whether or not the property
is attractive enough to warrant an offer. You should have obtained the comps in the surrounding
area and made sure that the house you are considering is within the price range of those that have
recently sold. (Refer to the chart, Evaluating A Property, on the next page.) Heres a tip buy
the cheapest house in the neighborhood; it will have the greatest potential for appreciation. The
highest priced properties will establish the upper end of the market and everything below will move
upward accordingly.
If you cannot find any comps in the area, find out the assessed value of the property by calling or
visiting the tax assessors office in your city or county. Although a less accurate guide to use in
preparing an offer, the assessed value, as a general rule, is usually 80-85% of the fair market value.
Another alternative, when you do not have comps, is to cruise the neighborhood for other houses for
sale. Find out the prices, the square footage, number of bedrooms and baths and any other amenities
of similar homes in the area. Determine the price per square foot and then multiply that figure by
the square footage of the home you are considering. Make sure you discount that asking price per
square foot by at least 10% for a closer estimate of fair market value.
When you inspect the property, determine how much work needs to be done. If you are a beginning
investor, stay away from fixer-uppers. These can erode your capital very quickly and should be
considered only by experienced investors. Stay away from situations like those experienced in the
movie The Money Trap! Cosmetic repair work, such as painting, cleanup and landscaping, is
okay. You can make up the cost of the repairs by negotiating a better price with the seller.
Above all, make sure the offer you are planning to present meets the criteria for a good deal. You
are using real estate as an investment to achieve your financial goals. Does the deal fit the 10/10/10
Rule, the 80% or Less Ideal, or the Return on Cash Out of Pocket criteria?.
Prepare your offer using the Contract for Purchase and Sale form you have developed. No matter
what form you use, make sure that you attach an addendum to it. In the addendum, you should
insert any number of escape clauses that can be used to limit or totally eliminate your liability
should you choose to cancel the contract. Call your consultant, and discuss the document before you
present it to the seller.
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# of
baths
Sq.
ft.
Date
sold
1. ____
____
__________
2 ____
____
3 ____
# weeks
on mkt.
Listing
price
Selling
price
Price/
sq. ft.
____ _______
_________
__________
________
__________
____ _______
_________
__________
________
____
__________
____ _______
_________
__________
________
4 ____
____
__________
____ _______
_________
__________
________
5 ____
____
__________
____ _______
_________
__________
________
Totals:
_________
__________
________
Averages:
_________
__________
________
Listing
price
Selling
price
Price/
sq.
_________
__________
________
Target Property:
# of
bedrms
# of
baths
Sq.
ft.
Date
sold
# weeks
on mkt.
______
____
__________
____ _______
ft.
remarks or ask questions. Listen intently to what they are saying and notice how they are sitting.
Are they interested in moving forward with your offer, or are they just going through the motions?
If the seller(s) are ready to accept the offer GREAT! Get them to sign the contract, thank them
and leave. If they are not ready, write down any and all comments from the seller(s). Do not
comment on them individually because at this juncture, you may or may not know whether they are
deal points (items that could potentially make or break the deal).
Since timing is everything, if you are very close to finalizing the deal, negotiate the final details
with the sellers and modify the offer accordingly.
If it appears that the offers are far apart or if you are unclear about their counter-offer, gather up
your items when the sellers are finished with their comments and express sincere disappointment
that they did not accept your offer. Tell them you will have to consider their comments, and that if
you want to proceed, you will be back in touch with them. By doing this, you regain control of the
negotiations, and leave the seller(s) unsure about whether they can make a deal.
Develop a system for filing the information that works for you. There are a variety of database
software packages available for personal computers, or you can create your own filing system. The
important part with whatever system you choose is that you can quickly retrieve the information
when you need it.
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Lines of Credit. Based on your personal credit history, you can establish pre-approved secured or
unsecured lines of credit. Contact your bank or area lending institutions for more information.
Life Insurance/Retirement Plans. An often overlooked source of capital is cash value on life
insurance policies and monies in various retirement plans. You can borrow against these cash values
at often a very low interest rate. Retirement plans such as 401(k)s generally have loan provisions
allowing you to borrow up to 50% of the money in the plan without tax penalties.
an initial evaluation. We need to gather much more information before determining whether this is a
sound investment.
Calling on the other For Rent ads can generate great leads. When you call on these ads, the first
question you should ask is, Would you be willing to sell the property rather than lease it? If the
answer is yes, or if there is a significant pause on the other end of the phone, start asking more
questions. You have probably found a motivated seller who, because of his or her tax situation, may
be very amenable to considering seller financing as part of the purchase price. The seller may want
to take the money over a period, because of the depreciated basis in the property, and minimize the
tax consequences for the present year. If the property owner is unaware of this strategy, ask him or
her to explore the situation with an accountant. You may find a seller who is more motivated than
you originally thought!