Almost every real estate transaction is going to involve at least one — and many times more — contracts. A wholeseller will have the contract between it and the property owner and the assignment contract with the investor who purchases the property. A rehabber will have a contract for the purchase of the property, a contract with the contractor(s), and then another contract for the sale of the property. A developer will have many contracts, including the purchase contract, declarations, and leases. Landlords enter into lease contracts with tenants. No matter what type of investing you do, contracts are inevitable in this business.
One mistake that real estate investors commonly make is utilizing contracts they receive from “gurus” or people they pay to teach them about real estate investing. The reason this is a mistake is not that the contracts may not be good, but rather because most of the gurus are located out of state and had contracts drafted by out of state lawyers. As real estate law varies from state-to-state, what is a good contract in Texas, might not be a good contract in Kansas. Moreover, even contracts in Kansas may not be right in Missouri, as for example, Kansas is a judicial foreclosure state where foreclosures go through the courts, and Missouri is a non-judicial state were courts are not involved with most foreclosure actions.
The other problem with these contract forms — which can also apply when using even local forms, such as the Kansas City Regional Association of Realtors (KCRAR) standard form — is that standard forms are made for standard transactions. In other words, it is impossible for anyone to draft a contract that covers every possible scenario. Moreover, real estate investors often use unique or creative strategies to structure deals. Therefore, the investor (or his or her real estate agent) attempts to create addenda or amendments to modify the standard form for the transaction. The more you try to modify a standard form, the more likely you create inconsistencies that can be expensive to litigate. Therefore, it is generally best to start from scratch instead of trying to fit a “round peg in a square hole” with a standard form contract.
Another thing to keep in mind, that is often overlooked, is that contracts may be copyrighted. For example, the KCRAR forms are authorized for use only by members of that association. Similarly, contracts found online often also contain copyrights that restrict their use by the general public. Although you may never be caught, good investors do things the right way and don’t break laws by using copyrighted contracts.
Our Contract Philosphy
Attorneys often have different approaches when it comes to contracts. Some attorneys like to use big words and “legalese” to make the client feel like they are getting what they paid for. Other attorneys — like Rick — prefer to use common language so that the contract can be understood by non-lawyers.
It is our philosophy (and experience) that disputes can be avoided when all parties understand what they are agreeing to. This is accomplished by drafting a contract that is straight forward, includes what is necessary but not what is not, and addresses the specific concerns of the parties. If we can draft your contract in one page, we will. If it is a fairly standard transaction and we can use a standard form, we will do that too. In fact, that is one advantage of using a lawyer that is also a real estate broker. As mentioned above, the KCRAR forms are copyrighted. As Rick is a member of KCRAR, we can utilize those forms when they are right for your transaction or draft amendments to said forms when they are drafted by other real estate agents.
Contract Drafting Process
There are a lot of options when it comes to obtaining contracts these days. You can obtain forms from real estate investing gurus, books, organizations you are part of, and websites, such as Legal Zoom. Therefore, it is important that when you hire us to draft a contract, we do not simply provide you a form as you can do that less expensively elsewhere, including by signing up for our Guarded Pockets™ program that includes access to form contracts and unlimited scheduled ten minute phone calls with an attorney. This does not mean that we will not create you a form contract that can be used for similar transactions within your business, as that is something we do regularly. That form, however, will be customized to your business model and will not simply be the same form we provide to all other clients.
Our goal when drafting your contract — whether it be a one-off or a form you will use regularly — is to take the time to get to know you, your situation, and the goals for the contract. This takes time and is not a one-step process.
Step 1: Sign up for Guarded Pockets™
If you are not yet a member of Guarded Pockets™, the first step is to become a member. In addition to allowing us to help with your business planning, Guarded Pockets™ also provides many other benefits, including unlimited scheduled phone calls with a real estate attorney, registered agent and deed of trust trustee services, state compliance monitoring, daily REO and distressed MLS listing emails, and discounted title and real estate brokerage services. You can learn more about Guarded Pockets™ or sign up for a free trial by clicking on this link.
Step 2: Sign up for Services
Once you are a member of Guarded Pockets™, you can sign up for our services including our contract drafting services.
Step 3: Complete Intake Form
One we have completed the introductory call and learned more about what you are looking for, we will send you an intake form that you can use to provide us with information about you, or business, and the specifics of the contract. The purpose of this form is to make sure that we have all of the information we need, and to provide you time to think about and gather all of the necessary information instead of answering “on the fly” during the initial phone call. This form will be sent to you via email and can be completed online using a computer, smart phone, or tablet.
Step 4: Document Preparation
Once we receive your intake form, we will begin drafting your document or contract. We will incorporate the information you provided during the introductory phone call and on the intake form to ensure the contract meets your needs and expectations. Because this contract will be customized for you, this stage of the process can take about a week or slightly longer depending on the length of the contract and number of contracts necessary.
Step 5: Client Review
Once we have prepared your contract or document, we will forward it to you for your review and comment. We ask that you take a few minutes to read it over, and most importantly, let us know if you have any questions about anything we have written into the contract. We want to make sure this contract is exactly what you want and meets your goals for the contract.
Step 6: Additional Revisions
This stage is not always needed, but if it is, it is included at no extra charge. As you provide your comments and suggestions on the contract or document, we will make the revisions necessary to make sure that it is exactly what you are looking for.
Step 7: Document Complete
Once you have reviewed the document and we have made all of the requested/necessary revisions, we will provide you with a final copy of the document and will close the file in our office.
We believe in fair, honest, and transparent pricing, and therefore, we charge flat rates for all contract drafting. Our flat rates include unlimited revisions for most contracts, unless the revisions change the nature or purpose of the document. In the rare event that the flat rate does not cover your desired contract, we will provide you with an individual quote, up-front, and before you owe any fees to our firm.
The costs for drafting your contract will depend on the type of contract requested. You can view our pricing by visiting this page on our website, which links to the exact same forms you will use to sign up for services after becoming a Guarded Pockets™ member.