The most dreaded words a residential real estate buyer hears are: ‘let me have my lawyer take a look at this, then I’ll get back to you’. The reason? Lawyers look at real estate deals through a black & white lens. To a lawyer they expect a moderate conditional period, a deposit, then a moderate closing period and honestly it’s what I dream about as well, but real life often gets in the way, making deals more and more complicated.
A few ways my deals become interesting are through Cash Back terms, Assignment Scenarios and long holding periods. This post will discuss the most common creative deal strategies & how to ease conservative lawyers into these abnormal terms.
A Cash back scenario can be used on each side of the agreement. For instance, if you’re buying a house for $300,000 & would like some cash for renovations, you can change the price to $305,000 with a ‘term’ that the seller owes you $5,000 cash after the mortgage has been paid off. On the other hand, cash back is a great way to motivate sellers to sell for your price. What if the only reason a seller won’t accept your price is because they’re cash poor at the moment & need some money to move out? Getting them some ‘cash back’ in their pocket can be a good way to move a deal forward especially if your price is not completely covering their existing mortgage. The best way to get a Cash Back clause into your Purchase Contract is to get your lawyer to write one, then insert it with a space for signatures underneath.
Assignment Scenario’s are simply times when you get ‘under contract’ with an owner & then sell your purchase contract to another buyer. This part is not very complicated and completely legal under Alberta’s current contract laws, we use it all the time at HomeBuyersYEG. This type of situation can happen for many different reason but often times it’s a great strategy when you’ve just got too much on your plate & want to earn a small commission fee by selling the rights to a deal. To protect yourself from potential legal problem with assignments most lawyers will not have a problem with you simply signing your name at the beginning of the purchase contract with ‘Name / Nominee’.
Lastly, the dreaded long holding period. The longer a contract is tied up the more closely a Real Estate lawyer will look at it because a longer period means a longer time they’re liable to their clients. For instance, if they miss a strange clause and the contract closes in 1 week there’s only 1 week for that clause to effect anything, but if it’s 6 months that’s a long time, for a lawyer, to be held liable for their interpretation of the contract. A good way to ensure the owners lawyer reads the contract & approves is to prepare a statement of intentions document with the sellers before they send the Purchase Contract to their lawyer. This document should outline why both parties believe a longer holding period is mutual beneficial & why any ‘non boiler plate’ clauses are added into the contract. Then both you & the property owners should sign this statement. This opens the door to constructive criticism rather than just criticism from the lawyer.
So there’s a few small tips that may or may not get your ‘creative’ contract’s stamp of approval from a conservative lawyer. My last piece of advice: Have your own lawyer call their lawyer to help explain. Not all lawyers are created equal and this piece of advice is provided with the hope that maybe your lawyer could even teach their lawyer a thing or two about real estate law in general. There are many times a lawyer will find themselves representing a contract in a real estate deal even though it is not their area of expertise!
If you have any questions, or are having any trouble with Real Estate contracts please reach out! 780 306 1661