7 Things You MUST Remember When Putting Houses Under Contract

7 Things You MUST Remember When Putting Houses Under Contract

Want to know how to succeed flipping houses?  It’s very simple, actually.  Whether you’re rehabbing houses or wholesaling them, there’s just one thing you need to do.

You need to put houses under contract.

You might be thinking, “That’s crazy—there’s way more to it than that.”  And, sure, you’re not wrong—there are a few other moving parts to consider when investing in real estate.  But honestly, it all boils down to this.

Put houses under contract for the lowest price possible, and the rest will fall into place.  Do this and you will succeed in this business.

Why is getting houses under contract so important?

When you get a property under contract, you own the rights to make money on that property even though you haven’t yet purchased the property, committed to anything, or opened yourself up to any liability.  This is why I love real estate—when you have a house under contract, you own the rights to a return on an investment before you’ve made the investment.

“But I don’t have financing lined up yet.”  Don’t worry—get the house under contract first.  “But I haven’t found a good contractor.”  You will—just get the house under contract.  “I’m not sure where to find buyers.”  That’s okay—buyers will pay attention when you show them a good deal that’s under contract and ready to be assigned.

You don’t even need to know in advance what you’re going to do with the house.  Just put it under contract, then dig deeper into the deal and decide whether to flip it or wholesale it or hold it.

Now, I’m not saying you should run out right now and start making crazy offers all over the place, trying to tie up as many houses as you can without really thinking it through.  This kind of scattered approach isn’t going to get you very far.

Here are a few things to keep in mind when putting houses under contract.

  1. Know your criteria. You need to have a clear idea of what you’re looking for.  Don’t waste time making offers on properties that don’t fit with what you’re trying to accomplish.  I said above that you don’t need to have a specific plan for what you’re going to do with a property before you put it under contract, but you should at least have an idea of what you’re trying to accomplish, what your goals are, and what your options for the property will be.  You do this by establishing criteria in advance.
  1. Get good at analyzing deals quickly. Your numbers don’t have to be perfect when you’re putting together the offer, but you need to be able to evaluate each opportunity and decide whether it’s worth pursuing and whether it fits your criteria—see above.
  1. Don’t forget to negotiate. Negotiation is a big part of this process.  You might find things during your inspection period that make you question whether the property is a good deal or not.  But don’t  just walk away.  Negotiate, negotiate, negotiate.  If the seller is motivated to sell, he or she should be open to hearing your position.
  1. Keep the contract simple. If you’re making an offer through the MLS via an agent, you may not have much control over this, but if you’re working with private sellers directly, you can use any contract you want.  Keep it short, simple, and clear.  We have one in our training program that some of our students use, and it’s just a single page.  Works great.
  1. Always, always, always have contingencies in place. Everything I’ve said so far in this article assumes you’ll have a solid inspection contingency in place at the very least, along with other contingencies if the situation calls for it.  Contingencies protect you.  Make sure your contract includes them.
  1. You’re not taking on any risk until your contingencies expire. This is so important.  I see so many people who are afraid to take action and make offers because they’re worried about risk.  But nothing is at risk—not even any earnest money you may have put up—until your contingencies expire.  Do your due diligence during the inspection period, and from there, you can either back out if you don’t like what you find or move forward with confidence.
  1. When in doubt, get the contract out. I say this all the time to my students.  If you’re looking at a deal and you think it’s a good one but there are still a few unknowns, get it under contract with contingencies in place and then dig deeper.  Don’t waste your time overanalyzing a property before you’ve gotten it under contract.  That’s what the contract period is for.  So when in doubt, take action and go for it!

Here’s the bottom line.  Everything I’ve described above?  You can do all of this.  You can put houses under contract.

And because you can do this, you can make money in this business.

If you’re wondering what it really takes to succeed or what you should focus on or where to begin, this is your answer.

Put houses under contract.

All right, now I want to hear from you—I listed 7 things you need to keep in mind when putting houses under contract.  Which of these would you like to learn more about?  Contracts?  Contingencies?  Analyzing deals?  Negotiating with sellers?  Let me know in the comments below!

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