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I like some weasel clauses

Email|Link|Comments (3) Posted by Rona Fischman July 7, 2009 02:39 PM

I got this email today from R. I find myself supporting what Sam calls "weasel clauses" the day after he wrote about them. Well, that's life in real estate...R. wrote:

Hi, I was hoping you could provide a little sanity check here. I am in discussions with a Seller, on a multi-family and it is FSBO. We have a handshake agreement on price, closing and terms of the close (1 unit being delivered vacant and 1 units tenants being subject of a satisfactory interview - if not, than that unit being delivered vacant as well). The seller isnt using a realtor (thus FSBO) and I am a little concerned that this will delay things. He isnt familiar with the process. I have an attorney working on the PSA, we have a home inspection scheduled (and if that goes well, we will sign the PSA). From there, the Seller will give the tenants notice and 45 days later we will close with the units vacant. What steps can I take to make sure the process is moving along on his end smoothly (where a Realtor normally would be making sure things are moving smoothly)? Can I ask to speak with his attorney? I want to make sure that notice is properly given to the tenants, that everything is in order with the title, that a fire department certificiate of conformance is given, etc Do you have a list of things that I can expect from the Seller and that I can reference when speaking with him to make sure things are moving?

Were I your agent - paid by commission or by the hour - I would have required a written Offer to Purchase. The expression goes “A handshake agreement is worth the paper it is written on. “ Do you have recourse after your home inspection? Where is that written? The Offer to Purchase is protective of the buyer because it has clauses that help you stop the sale if the home inspection goes foul. Also, you can get your deposits back if you don’t get your mortgage. Also, you could write in the property will be delivered vacant; then if it isn’t vacant, you do not need to close with tenants in place.

There are a lot of steps to the process. You need someone in this transaction who is watching to see that things are getting done. You want a sanity check? You're nuts to do this with no one with experience in the picture. I don't care if it is a Realtor, a real estate agent, or an attorney.

What would you tell R. to do?

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3 comments so far...

get a good attorney and get EVERYTHING in writing, with as many items in place to protect yourself as you can.

Posted by Chloe July 7, 09 06:09 PM

I will add to Chloe's comment by saying that you need a good full time REAL ESTATE attorney and maybe a broker that will work for you on a fee for service basis. (While the attorney dots the i and crosses the t, the broker provides an experienced set of eyes and ears and can repaort back to you and your attorney when he/she sees a potential problem ahead.) You may not see it, but your comments indicate to me that you are in over your head already and you are only at the beginning of the process! There is no list that can adequately cover all of the things that might occur in a real estate transaction because each oarty is reacting to the other parties move. That would be like trying to play chess with a list of pre-determined moves that you would make regardless of what moves your opponent makes.
As for weasel clauses, please understand that there is a difference between a "weasel clause" that allows an obviously easy out of a transaction and a clause that is absolutely necessary to protect your interests, like a properly worded mortgage contingency clause and, in this market, a properly worded appraisal clause.

Posted by Sam Schneiderman July 13, 09 12:12 AM

Don't assume the tenants will move out just because they get notified to. Construct your cost analysis as if you're going to have to take at least one of them all the way through to court-ordered eviction. Then, if everything goes as planned, smile and wipe the sweat off your forehead.

Posted by Ed July 18, 09 09:41 AM