Robert Kiyosaki - Contingency
I read the Robert Kiyosaki - Rich Dad Poor Dad book and he mentions a "cover all" contingency that he likes to list on his Offer to Purchase contracts. Correct me if I'm wrong, but I think it went something like this: "This agreement is subect to appproval by business partner." Then he mentions that what the seller doesn't know is that his partner is his cat. 
What I want to know is: Is this contingency legal and worded correctly? Can it safely be used to cover ALL other standard contingencies such as:
"This agreement is subject to financing deemed suitable by buyer and buyer's inspection, appraisal, and approval of premises at time of closing."
Am I missing any?
What I am curious about is, is it safer to list each contingency seperately or could I get by with the Kiyosaki contingency?
Thanks everybody,
-Tom
Anybody here know anything about this type of contingency/escape clause, etc.?
I remember reading that. I think its a great easy out and here is what you have to remember-
The seller (unless he is an idiot) reads every offer presented by his listing agent and accepts the best one. I DIDN'T SAY- the higest priced one, or the shortest closing time one.
Each seller is different- if he read your subject to contingencies and accepts them, then he accepts them, other wise he would counter and say "Seller accepts offer as is, except subject to approval of buyer's business partner contingincy".
You can put what ever you want into the contract, the more rediculous, the less likely that it will be accepted.
I'd just go with "this offer is contingent on buyer finding financing acceptable to himself" and see if you can get away with out stating what you consider acceptable financing. Then if you need to back out say "Buyer withdrawls offer due to inability to obtain acceptable financing" Then if, they cry and whine about it, you can say that you only wanted to do the deal if you could get prime AND 0% Down, via 80/20, You would have to have a really high net worth compared to the property for a bank to go for that, Or the deal would have to be really really good for the bank to go with that, in which case you would not back out, but assign it to someone else if you didnt want to do it.
-Chris[ Edited by chongdog on Date 10/09/2003 ]
I make many offers and always try for as long a due dilignece period as possible.
I use the clause that basically says that, in the buyers sole and absolute discretion, this property must meet the buyers needs, etc.
[addsig]
Chris is right. The seller would have to be desperate or stupid to accept an offer with 6 weasel clauses in it. If you pick one, pick the "financing acceptable to buyer". The last thing you want to do in your farm area is give people the impression that if the deal does not go exactly as you plan, you are going to walk away. Nobody will deal with you. Some of the best deals I have gotten have come from former sellers pointing their friends in my direction and passing me leads because I give the seller Win/Win.
what happens if you miss the contingency date?
I think that you are getting to far into it. Most smart investors have created an LLC (Limited Liability Company), which protects their interest and them selves because it is its own seperate entity. Along with that, most LLC's by state standards are considered a partnership. That is your partner (the cat).
Best Wishes,
Tom Stewart[ Edited by TomStewart on Date 04/18/2004 ]
True the LLC may be a good partner unless you are trying to get the bank to sell the llc a short sale. the bank says if an investor is buying this home its because there is enough money in it to put it back on the market and sell it and make 10k so they are not ream motivated and they will waight till right befor the trustee sale to accept a offer like that so they can see if the agent will bring them a better offer that the agent feels will go through so the agent gets paid for their time.
as a agent i dont see banks taking offers for 20 to 30 % under market value. maybe 10 to 15% thats ok. infact HUD will sell it if they net 82- 87% & of where the BPO comes in at, but not much more than that.
Brook
Contingencies are fine on privately owned properties. HUD and many banks with REO's will not accept an offer with contegencies/weasel clauses. And only one is needed in a contract not a half dozen,but make it a legitimate one.
Yeah, I agree. Sellers, in general, HATE weasel clauses. If I got two offers on a piece of property, one that says their partner has to agree on it, and one that just says if they can get financing, they'll buy it, I'd accept the financing one ANY time. The other one, I'd tell'em to go clear things with their partner next time before they make an offer... In general, I'm just not impressed with Kiyosaki in real estate stuff. As a MOTIVATOR to get STARTED, he's fine, but in real life, his stuff just ain't realistic in a lot of cases.
Most sellers care more about when the "weasle clauses" expire than what they actually say. If there are two identical offers, but one has 2 weeks to do due dilligence, and the other has 8 weeks, the seller will take the first.
At some point, when all weasle clauses expire, the contract becomes enforceable by both parties.
Check your local customs as well. Around here one of the standard forms has a "neighborhood review" clause that says the buyer has N days to decide whether or not they like the neighborhood. It's known as the "get out of jail free" clause. You're probably more likely to be taken seriously if you just put in one of these than if you make up your own. (That is, if you're just looking for a generic weasel clause. If you've got something in particular that's a concern, that's a different story.)
Sellers aren't foolish, and they know exactly what it means.
You need to consider the downside for yourself as well - an offer with these sorts of clauses is much weaker than one without them. If you're in a multiple offer situation (more often than not here in Seattle) your offer is giong to the bottom of the pile.
These days in Seattle the trend is more to remove contingencies than to add them. Doing things like preinspections (as in pay to have the place inspected before you have it under contract) is starting to happen so you don't have an inspection contingency in the offer.
I always try to do my checking before the offer. I have found over many years of screwing up that it is better not to insert weasle clauses. If I am hesitant, I would rather not procede or assign the offer to one of my more impoverished friends. I have on occasion utilized the "Subject to acceptable financing".
I never name my cat. First of all he makes a terrible witness as he has an attitude. Also some of our present time Jurists will not allow the contract if upon investigation they are met with a loud meaow instead of the usual grunt of non compliance. Something about not having a proper meeting of minds. Whatever.
Ignore the book I think the writing of it was some form of asthetic copulation and aspired only to achieve satisfaction to the writer. "Oh Dad, Poor Dad, I think my Father Has Been Had." If I need motivation or a stirring of my Psyc I have only to look at my lack of bank balance. Oh God does that make me roll!!
Reflecting Lucius
You're missing a big point...it's almost impossible for a seller to legally force a reluctant buyer to go ahead and ante-up his funds and buy...so it really isn't crucial what goes into the P&S Agreement...since the seller can't enforce it anyway, what difference does it make?
The seller can & will probably keep any earnest money that's been put up, so I'd keep my EMs low on any offers made...that way if seller does keep the EM when you, as reluctant/unwilling buyer, decide to walk, you haven't lost much..
Quote: "This agreement is subect to appproval by business partner." Then he mentions that what the seller doesn't know is that his partner is his cat.Tom,
I agree with JohnMerchant's post. Like Lufos, I usually try to avoid any contingencies when I am the buyer unless the property is still under construction.
As to the specific clause you asked about, if you presented me a purchase offer with that contingency clause, I would just tell you to have your partner come in and make an offer when your partner is ready to buy. I would not consider you a serious buyer, and would not even entertain your purchase offer.
That's just me, and how I am. I am never a motivated seller, because if I don't get my price on my terms the property stays in my rental portfolio.
It really depends on your style.
I know investors that will make TONS of offers on properties that they've never seen. Once they've got them tied up, they'll do their due dilligence. I think this is wise when working with properties in hot areas, great deals, FSBO's, and listed properties
Others will do their due dilligence on fewer properties, but then agressivly get the contract exactly as they need it because they 1, have time on their side, and 2. already know the property and the numbers. Probably done more on rehabs, short sales, and sub. to's, and motivated sellers that have contacted you.