Real Estate Contracts

depending on your level of expertise and your track record.

No matter how you cut the cards, there is nothing more fundamental to your success or failure as a real estate investor than your paperwork.

Everybody insists they have the best paperwork. Just ask five different real estate attorneys and see what they have to say.

This reminds me of a preface in a book written by a manufacturer about cost accounting. He challenged the reader to take the same set of financial statements to 20 different 'cost accountants' and see how many came up with the same costs. He pointed out that he had actually done this and paid for their analyses and got 20 DIFFERENT COSTS back from the experts. These results prompted him to write his own book on manufacturing cost accounting based on his business - not theory.

There is an old business addage that says, "The worst thing you can do to your business is let your accountant tell you how to run it."

The same thing goes for attorneys.

There are exceptions of course. But think a minute. How many attorneys have you hired that are better at doing your business than you are?

They are in the business of being attorneys.

Here's a useful piece of advice that I picked up from Harvey Mackay in his book, "How To Swim With The Sharks Without Being Eaten Alive."

Mr. Mackay says to hire an attorney to draw up all of the contracts you are going to use in your business. Spend the money up front and have the attorney nit-pick the details as many times as you need until you get them where you want. After that, keep copies of the contracts with you at all times.

This idea has always made sense to me so I have incorporated it into my approach to real estate contracts and investing.

Oh yeah?

Trying filling one out wrong and having to come up with cash at the closing table on a deal that was supposed to make you money.

Sometimes the simple omission of a clause can cost you plenty.

Wait until you find out about a renewal clause in your agreement that you forgot to exercise and the seller sells the house to another buyer - after you did the repairs.

Or forgetting to put in a clause specifying that any individuals on a rehab project must be bonded, licensed and willing to sign off on a lien waiver prior to final payment.

Get a set of real estate contracts that are proven in your state or buy a 'paperwork set' from a proven investor and have them modified by your attorney to accomodate local statutes.

Then learn how to use them.

When I say that, I think of people like Lou Brown and Greg Pinneo who teach courses in negotiation and how to use the contracts effectively.

Louis Brown is an icon in the Atlanta real estate investing market. He is not only an extremely intelligent investor and mentor, he has developed a very comprehensive documentation set. We use it and recommend it highly .

Greg Pinneo is a local Seattle investor with a huge track record and a member of our local real estate investing club. We attended his one day seminar in 2003 and it became evident in a heartbeat that this guy really knows his game AND that he really cares about people.

Recently, he started teaching additional seminars that I would highly recommend - and one in particular - focuses a lot on real estate contracts and how to use them. The title to that seminar is:

"Foundation for Freedom: Finance and Negotiation."

He discusses: