While you don't have to become a real estate attorney or even a title company nerd, it is important that you understand the language of real estate so that you can intelligently move through the world of real estate safely and profitably. It's been said that the language of science is math. Well, the language of real estate is the language of contracts and industry-specific jargon. It's terms like deeds and mortgages and encumbrances and conveyances. Don't let any of this intimidate you. Anyone, and I do mean anyone, can learn the language of real estate. All it takes is a little patience and a willingness to spend enough time exploring the world of real estate and you cannot help but acquire the language of real estate. Rather than let this article bog down in a glossary of real estate terms, I've included a special online training course on the language of real estate, including the 10 real estate terms you must know, as part of your FREE Investor Fast Track Program. You'll get a chance to master these key terms and learn how to use them in your investing business. After all these years helping new investors make a lot of money buying homes without cash or credit, I've got it boiled down so that in one-and I do mean one-quick crash course you will be up to speed on the "Big Ten" as I like to call them, and well on your way to becoming fluent in the language of real estate.
A contract is just an agreement between two or more parties in which one party makes an offer, the other party accepts the offer, and something of value (called consideration) changes hands. While a contract doesn't need to be in writing to be valid, with real estate in order to be enforceable a contract typically needs to be in writing. But even if this wasn't the case, if you get nothing else from this part of the article take this one key home-always put things in writing. The key phrase to remember is: "If you dare it, document it!"
It's really important in any of your agreements to accurately lay out who are all the parties involved in the agreement. Now this seems obvious, but you'd be surprised at the number of students I've seen write up paperwork on a deal where they used vague language as to who exactly the parties were in the agreement. If it's a purchase contract where you are buying a property, make sure you list the vendor's full name exactly how they have it on the deed with which they took title. Do they use a middle initial? Or do they spell out their middle name? Maybe they hold title as the trustee on behalf of a Revocable Living Trust? Make sure you get it right. If you are leasing a property to a family, make sure you list all adults who are party to the lease as "Tenants" and not just one person. Are you requiring a co-signer to a loan agreement? If so make sure you accurately identify the co-signer and get their signature. Are you selling a four-unit property to a corporation? If so, make sure you identify the legal name of the corporation and the state in which it is incorporated. Did you remember to get the title of the person signing clearly listed? I think you are getting the point. You can't be too careful when it comes to accurately identifying and clarifying the parties to the business.
If the contract uses an acronym or other special label as a shortcut to reference a proper noun, make sure these shortcuts are clearly defined and consistently used. This is just a fancy way of saying that if you use a proper noun like "Closing Agent" in your agreement, make sure somewhere in the agreement you have a point that says, "The ‘Closing Agent' shall be XYZ Title Company, located at XYZ Street, Anytown, CA xyz." When you're reading through a contract, sometimes it helps to have a cheat sheet listing all the acronyms and defined terms and parties so that you can easily translate the legal gobbledy gook into plain English.
I think you're probably spotting the trend with contract basics-half the battle is just being crystal clear as to who or what you are actually talking about. In the case of identifying a property, while a street address can be enough for things like a lease agreement, or a repair contract with a roofer, make sure that for any purchase and sales contract or any document you plan on recording you use the "legal description" of the property. This is the official description of the property, found in the public land records at the county recorder's office or county courthouse. Here's an example of a legal description: "Lot 3, Block 24 of the High Hopes Subdivision as recorded on Map No. 322 recorded in the County Recorder's Office on May 1st, 2009, in the County of Glorified, State of . . ." The easiest place to get the legal description is from the Preliminary Title Report you get on the property from the title company as part of your due diligence work. This is a simple report the title company will generate for you which will have in it the legal description of the property. You can also get it from the loan documents the property owner has in her files from when she bought the place, or from an old copy of her title insurance policy, or even from a copy of her deed if she has that handy. Since you probably won't have any of this handy when you are meeting with the motivated vendor to put the property under contract at the start, just sign the business using the street address, and in the blank space in your purchase contract where it asks you for the "legal description" simply write, "To be provided later."Never let the fear of not having the right answer stop you from signing a deal. Provided you use investor-friendly forms and contracts, you will have powerful protections in place that let you safely sign up a business fast; then, after you have it under contract, go back and do your due diligence.
State things plainly so that a neutral third party (read "judge") who is reading the contract without explanation would interpret your agreement in the way you want them to. I want to make sure I am making something absolutely clear. I am not looking for you to act as your own attorney, nor am I asking you to become a real estate law expert. I think you will need to have a sharp attorney look over and write up many of your real estate contracts. It's just critical for you to understand the basics for three reasons. First, there will be many times when you are ready to strike a business and you won't have your attorney handy and with you. If you wait until your attorney draws up any needed agreements, you might as well kiss most deals goodbye. For example, imagine you're meeting with the owner of a six-plex that you'd really like to buy. Because he is highly motivated, he's verbally agreed to sell you this USD1.2 million property for USD700,000. What do you think would happen to this business if you said to the seller, "Gee Mr. Vendor, I'm glad we could come to agreement on price and terms for a cash sale. I'll go meet with my attorney to get all the paperwork written up. It should take three or four days for me to get it back for you and I to sign . . ." What do you think would happen to your great business in those three or four days? Hint: Look for the other investor walking out of the residence with a silly grin on her face and a signed contract in her pocket. The key is to lock up the property, and then later you can have your attorney draft the more involved closing documents for the actual closing on the property.
The second reason for you to become fluent with the basics of real estate agreements is because there are going to be many times when you need an important "contract" to immediately use in your investing but you won't have your attorney draft the document. Instead you'll need to get the agreement in writing on your own. For example, once you get your attorney to go through your "standard" lease you'll use with renters, you will need to be able to know the basics so you can correctly use that contract in your management of your properties. One goal of building your successful investing business is to build a library of approved contracts for your business to use in its day-to-day operation. This will include documents like lease agreements, purchase contracts, rent-to-own paperwork, and standard releases from your contractors once they've been paid. The third and final reason you need to understand the basics of contracts is because this is the language of real estate. Just like math is the language of physics and money is the language of accounting, contracts are the language of real estate. You'll be training your brain to get good at agreements by following this simple rule. Remember, a contract doesn't need to be in fancy language with "whereases" and "ipso factos" and "pepto-bismos." Rather, it just needs to clearly lay out who agrees to do what, by when, to what standard, with what consequences, with what warranties, and for what payment.
Why? Because in any business, for every business point you talk through and agree to orally, there will be two more that never came up, but will when you get it onto paper. Because you're the one controlling the document you control the context, the terrain, of the business. And in doing this you will be in the driver's seat on the business.
Here's an example of what I mean. I once bought a two-bedroom condo from a motivated vendor who was in the military and had been transferred. In order to sweeten the business for the vendor, I agreed to an equity split where a portion of the profits I earned when I resold the property would be paid back to the vendors. To make the paperwork clear, I made sure to list in the agreement an example of how this split would work. It said something like, "For example, if the Buyer resells the property for USD200,000 then the Seller shall get paid the Option Price of USD105,000 plus 12% of the amount over USD130,000. In this case the Seller will get USD105,000 plus 12% of USD70,000." I think you get the idea. The key is to make it easy for a third party to understand how the business works.
Our website is not responsible for the information contained by this article. Webworldarticles.com is a free articles resource thus practically any visitor can submit an article. However if you notice any copyrighted material, please contact us and we will remove the article(s) in discussion right away.
This article was sent to us by:
Anthony Cole at
01222010
1. Things to Know Before Selecting an Apartment
All articles in this directory are property of their respective authors. Additionally, read our Privacy Policy
© 2010 WebWorldarticles.com - All Rights Reserved.