real estate investor contract addendum

Deal #2 is Progressing Slowly

Scott Costello All, Blog, Featured 5 Comments

real estate investor contract addendumAbout a month ago we came to a verbal agreement with a seller to buy a house.   Since that moment everything has been going at a snails pace.  This of course is because there is a lawyer involved who seems to not be making this a priority.  Besides taking a week to respond to anything we need from him he placed some addendums into our contract.  Non of which are terrible, but it just means the entire process will take longer as we negotiate some of them (remember he takes about a week to get back to use on everything).

The addendum to the Contract

  1. Any inspector we bring in to look at the property must be properly licensed and insured
  2. The offer to purchase is to be made with an Estate of Geraldine
  3. That we include with our offer a $1000 deposit into the seller’s lawyers escrow account
  4. The seller will provide a Deed with Covenants against Grantor’s act, rather then a Warranty Deed
  5. Buyer will have 30 days to investigate the “commercial”  zoned status of the lot
Only #1 and #3 are really anything that we’d want to negotiate on.
#1 – Licensed Inspectors
This causes us a problem when we want to bring through potential buyers to the property.  These buyers are probably not going to be licensed or insured so we’d like to get this part taken out of the contract.  I’m pretty sure that we could sneak them in anyway but I’d like to keep things as transparent as possible.  I wouldn’t want the deal to fall apart because we brought in a “non-licensed inspector.”  We are still waiting for a final decision on this matter with the lawyer.
#3 – $1000 Deposit
Our goal is to use as little money of ours as possible and putting up $1000 seems a bit much for us right now.  With a little negotiating by my partner, we managed to drop the deposit down to $350.  In the end the lawyer wanted us to put up some money as a sign of good faith.
Deed With Covenants Against Grantor’s Act vs Warranty Deed
I didn’t know what the difference was either, so I looked it up and found this on worldlawdirect.com
Deed With Covenants Against Grantor’s Act:   “With Covenants” refers to a deed that contains “Covenants Against Grantor’s Acts”. This means that the seller of the property makes a specific representation in the deed that they have not done or suffered anything which would encumber the property except what might be specifically stated in the deed.
Warranty Deed (from here)(updated 8/20/2011 @ 2:10pm):   A general warranty deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to you. The guarantee is not limited to the time the grantor owned the property—it extends back to the property’s origins.Important portions of a general warranty deed include,

  • The grantor states there are no hidden liens or encumbrances on the property. In other words, there are no debts or holds other than those that are obvious in public records.
  • the grantor declares that he or she is the owner of the property and has a right to sell it to you.
  • The grantor guarantees that if the title ever fails he or she will compensate the grantee (new owner) for any losses.

That guaranteee might or might not be helpful, because the grantor may be dead or unable to follow through on the promise if title problems are found in the future.

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Comments 5

  1. Hi Scott,

    I am not familair with “Estate of Geraldine” or is that the persons name?

    Also I disagree with your statement about Deeds. I could be wrong but in residential real estate, “General warranty deed” is the norm.

    1. Post
      Author

      🙂 yea, the “Estate of Geraldine” is just referring to the probated estate (or the owner of the property).

      You are correct about the General Warranty Deed. I did a little further research and decided to update the definition in my post. Thanks for questioning it Keith.

  2. Scott –

    I don’t think putting the estate of Geraldine has any real significance but who is the executor? Isn’t that the person who’s name should be on the contract? Probably putting the “estate of” allows that person to sign automatically since the exector would already have been named..

    As far as the inspector goes, they just want to be sure that if you have a full home inspection that you have a professional. They don’t want someone that bought a flashlight and some business cards last week and decided to cal themselves a home inspector.

    I always tell the person I am dealing with that I want the right to bring “contractors” through to give me estimates. I have never had a problem, but if someone didn’t want me to do that I would have to tell them I couldn’t buy the property. Doing my due diligence is my right. I would use the term contractor instead of inspectors if they have a problem with that. I also always put in the contract that I will be provided with a key to the property and be allowed to put a lockbox on the house once the contract is accepted. Then you can bring through anyone you want.

    Also, at least in my state, it is the buyers right to choose the closing company. Whenever I am dealing with an attorney, I always put on the contract that I will be closing at .. my attorney’s office and put in that name. I also put in the contract that my deposit ($100.00) will be held by my closing attorney.I have never had a problem with that either.

    About the deed, it would seem to me that they should guarantee a clear title and give you a general warranty deed.Would a title company insure this type of deed they are talking about? If not, there is a problem.

  3. What’s the reason for not issuing a standard deed? According to the definition you posted (I’m not familiar with the Deed with Covenants against Grantor’s Act), they are not even guaranteeing that they own the property.

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      Author

      I’ve asked my partner the same question since he is dealing with the seller. It may have to do with the fact it is a Probate property and we are dealing with the executrix but I’m not completely sure. I’ll see if I can get an answer.

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