Getting into real estate investing is exciting, for the newbie and the experienced investor. Regardless of how long you’ve been investing, I have a few golden rules that I share regularly:
- Don’t write big checks
- Don’t jeopardize your credit
- Don’t make promises you can’t keep
This article is about getting out of real estate deals and making a commitment to not make promises you can’t keep. If you’re not certain that you can take over payments when you take over a deed, don’t make that promise. Remember, knowledge is power. So, take the time to learn the ins and outs of Subject To investing before you run out there making promises to those seeking to be free from their mortgage obligations.
How to get out of a real estate deal
When you’re involved in Subject To investing, there may be a time when you are faced with wanting or needing to get out of a deal. This could be for various reasons, such as a major change occurring in your life, finding out information that makes you extremely hesitant about the deal, and so on.
When no promises have been made
So, let’s say that you’ve gotten a deed from someone, but you haven’t promised to make payments on their mortgage. When there’s been no promises made, you’re not obligated to follow through. If that deed has not been recorded, you can go back to that seller, sit down with him, and give him the deed back. You’ll want to do this with integrity and compassion, as you want to gain a positive reputation when it comes to your real estate investment business.
When promises have been made
If you have made promises, you can still go back to your clients and have a discussion, explaining to them your predicament or concerns. Be clear with them that you’re not out to take anything from them. You don’t want them to lose any money, and you want to work with them with honesty and integrity.
If the purchase agreement has been signed
If the purchase agreement has been signed, and you need to back out of the deal, it’s important that you use the purchase agreement that I give to my students. You’ll need a specific kind of contract for Subject To purchases, including common contingencies like financing and home inspection, but also uncommon contingencies that provide you the opportunity to release you from the deal.
If you have your own contract agreement, take it to your lawyer and have him look it over for you, making any changes they see fit. The reason you don’t want to use a simple purchase agreement is because if those common contingencies are met (financing, home inspection, appraisal), you may have a tough time getting out of that real estate deal.
Therefore, use the contracts I provide or take yours to a lawyer who is familiar with Subject To deals. And, as always, remember my three golden rules:
- Don’t write big checks
- Don’t jeopardize your credit
- Don’t make promises you can’t keep
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