The real estate purchase agreement is more than just a casual offer. The moment you and the seller sign it, it is a legally binding contract. Since you can put what you want in your offer, why not include some of the clauses that smart buyers use to protect themselves and save money? Some suggestions follow.

Six Purchase Agreement Clauses

A better earnest money clause. You can put a small earnest money deposit down and still be taken seriously, if you include a clause like this: “$100 earnest money deposit, to be increased to $2,000 upon acceptance of this offer.” You could also have it increased “when all contingencies are met.” This way, if there’s an argument about you backing out because the inspector found foundation damage, for example, you won’t have your money tied up while this is being resolved.

Inspection contingencies. Ask an agent about the wording, but basically you want something like this in the purchase agreement: “Contingent upon a home inspection and buyer’s approval of the results; inspection to be done at buyer’s expense within ten days.” Now you the right to have an inspection done, and if anything negative is found, you can refuse to “approve” of the results, and get your deposit back, or you could re-negotiate a lower price.

Assignation. If buying with a partner who isn’t there to sign the offer, or if you want to “flip” the deal to another investor, or if you may need to involve a partner for purposes of funding the deal, be sure that the purchase offer gives you that right. Putting “and/or assigns” after your name on the offer is usually sufficient, but ask the real estate agent what the local custom or language is. This lets you add another buyer to the deal, or assign the whole contract to another.

Let the seller pay. Specify that the seller pays for the closing fee, the title insurance, the recording fees, and even the points on your loan. Sellers often just want the sale at a given price, and don’t care about the details. What if they do care? You have given yourself some negotiating points. Get something for dropping each of the costs you included, like maybe a reduced interest rate if the seller is financing part of your purchase.

Basic financing contingencies. Suppose the loan doesn’t come through, and you can’t buy the home. You’ll lose your deposit, unless you have something like this in the agreement: “Subject to buyer obtaining a firm commitment for suitable financing within ten days.” If the seller balks at the vague language, you can specify what “suitable” means in terms of interest rate and such.

Spouse’s approval clause. This could be as simple as “Subject to a walk through inspection and approval of home by wife (or partner – state their name) within two days.” Now, if your wife says no within two days, you can back out of the deal and get your deposit back. If you want the seller to agree to this one keep the time frame as short as you can.

The above clauses are often called “weasel clauses,” because they give you ways to back out, or “weasel out” of a real estate agreement. Don’t worry about the label. A seller has the right to say no to your offer in any case. You, on the other hand, have the right to use these purchase agreement clauses to protect yourself.

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As wonderful and constant as commercial real estate is, there are some major pitfalls that can completely ruin the interest, investment and return on a property. Besides inaccurate assessments and risks that are beyond your comfort zone, the only real reason these pitfalls occur is because of the lack of due diligence that you perform. By not investigating deeply enough, not overturning every rock, and rushing into what seems like an awesome deal, you can experience some horrible events that can literally cost you hundreds and thousands of dollars.

These are setbacks I hope you never experience by asking every question, verifying everything, and assuming nothing.

Below you will find some unfortunate and common mistakes that can occur if you are not completely on your game.

Some of the major pitfalls in commercial real estate are related to the zoning and use of a property. Brokers may offer information that is not accurate about the rezoning and use capabilities of a property. Although many of the people in this business are honest and have integrity, you can bet you will run across a few brokers or agents that will do and say almost anything to sell a property.

Some problems that arise may include not checking with the city planning and zoning decision makers to see if a property can and will be able to be rezoned to the zoning that is expected. Also, just because the zoning may include your use, you must check with the city to make sure there are no special contingencies regarding use.

The last thing you want is to have a property you believe can be re-zoned to a higher and more profitable use, and after you purchase it, realize you cannot do what you intended! This can mean a less of a return on investment, or a complete loss of an investment. Believe me, situations can get very bad regarding the rezoning and use of a property, and fighting with the city will take more money, energy and time than it is often worth.

Another pitfall that can arise is purchasing a building that is leased, and then losing tenants due to leases or rental agreements being up! It is important to see and verify the leases of a building to make sure you will have some income to cover the debt service while you change, renovate, or do whatever it is you are going to do with the property. Verify you will have tenants when you purchase the property; otherwise, you may not have enough income, and this can leave you in the red.

It must be acknowledged that every property and situation can differ greatly from another. Because of this, there can be many different ways that a property can go. For this reason, all “what ifs” must be addressed, as well as exit strategies created for every scenario. When you limit yourself on exit strategies, you increase your possibility for failure.

With every property you must ask yourself, “What is the worse that can happen?” Weigh the risks and the probability of the worst happening, and either plan an exit strategy for this possibility, or don’t move forward. You must look at everything from the worst to best case scenario, and have an exit strategy for each. Not only will you be prepared for anything that comes your way, but you will have less of a chance of really getting buried and losing money on an investment gone badly.

In commercial real estate, I often see a person trying to save a few thousand dollars that ends up costing him or her hundreds of thousands, just because they try to play hard ball with negotiations. It is always important to know what you are willing, and not willing to do when you go into negotiations regarding the purchase or selling of a property, as well as leasing and rental agreements.

For example, asking for $35.00 per square foot and being offered $30.00 per square foot, (reasonable in this situation), and assuming the interested party is very motivated about the space, and coming back with $33.00 a square foot and nothing less, my cause the loss of the three year leasing agreement, and the income for another two months from the property because it is not leased out is definitely not worth it!

Take the $30.00 per square foot; get the property leased up, and make an agreement that the rate will increase two or three dollars every year after. Don’t lose the tenant because you want to play hard ball in negotiations when, really, you can make it work!

As you become more educated and get closer to reaching your goal of being a real estate insider, you may want to branch out into new markets and expand your comfort zone. This is great. However, you must realize there are many differences between various types of properties. Doing a deal with a 120 unit apartment complex is different than a 55,000 square foot office building.

When moving into different markets, items can easily be overlooked, and major problems can arise, simply because you are not aware of them. It is often a good idea to partner with someone already in that new market so that you may have the benefit of experience and know-how on your side. Learn form this venture so you will be more familiar with the market, property, and how it should be addressed. It is easy to get in over your head with new markets that can lead to major and expensive problems.

As you continue on your adventure in commercial real estate, be sure to do all your homework regarding a property. You will be less likely to run into problems, or better yet, be prepared to fix the problems if financially worth it. Never assume everything is as it appears, because, more often than not, it isn’t! You must play smart in this game, or you can lose everything. Use you resources to get the best and most accurate information and you can avoid these pitfalls in commercial real estate.

If you have chosen to renovate your home then you know the price can easily exceed your predictions. Home renos tend to have what is known as “scope creep.” This is when the renovations start and as they progress new things or problems cause there to be more work than originally predicted. This can be difficult to deal with is funding is limited so its a good idea to build contingencies into your financing plans right at the start. That way when the surprises pop up, you will be ready for them.

When thinking about renovation financing there are two likely candidates for you to consider. The home equity loan and the home owner’s line of credit. The amount available for a home equity loan is based on the amount of equity that you have built up in your home. This loan is sometimes referred to as a second mortgage. It is calculated by taking the value of your home and subtracting the amount left outstanding on the original mortgage. If you own your home outright, then the amount would be the home’s value. As an example, if you have a home that is worth $250,000 and you have already paid off $110,000 then your accumulated equity would be $140,000. The value of the property is what guarantees the loan so the interest rate is low as well as they payments. It is also normal to be able to secure fixed interest rates for such loans.

The other popular financing option is the home owner’s line of credit. This loan does not have a finite amount save for the limit which is once again decided by your equity. This is a popular option as it allows for a lot of room when considering costs. The loan operates much like a credit card, with a variable interest rate. This is certainly the most flexible of the options and does not have a definite end date. The line of credit remains open for as long as you need it and do not close it out.

The best way to discern which type of loan is proper for your needs is to confer with a financial expert or banker. Prioritize your needs and try to find a loan that is tailor made for you. Remember that your home is going to be on the line as collateral so be sure to plan your payment schedule carefully and within what you can afford to pay. Make sure that you research all your options here and find what work s for you and for your budget.

People work tirelessly to generate interest in a home they are trying to sell. Once they get an offer, however, they often are not sure how to evaluate it.

Evaluating the Offer for Your Home

You have read every book under the sun. You have read more internet articles than you can imagine. You have cleaned up your home, made repairs and put out your marketing. At this point, you feel like you are an expert in the process. Suddenly, you get an offer on the property. Now what?

The first thing to do is relax. Do not make the mistake of rushing to evaluate it. An offer is just that – an offer. It has contingencies and all kinds of little quarks in it. Although you have lived in the home for a lengthy period of time, you need to realize you are now in a business transaction. Once you have caught your breath, it is time to consider the offer.

The first issue is always the offered purchase price. The price will never be what you are asking for in the listing. It will be below the number, perhaps shockingly lower. At this point, you may feel the urge to pick up the phone and give the buyer a piece of your mind. Don’t! This is a business transaction. The buyer is merely throwing out a bit of bait to see if you are going to bite. If you do, they get a great deal. If you do not, they will evaluate any counter offer you make. If you do not counter, they can always submit a higher offer. Remember, this is a business transaction, not an affront to your pride!

A second issue concerns items in the home the buyer may want included in the sell. I have seen brawls break out over a lamp that would make a biker blush. Maybe that lamp is an heirloom that you can’t part with, but it probably is not. Only you can decide how valuable it is and whether it is worth losing the sale, but try to be objective and coherent when making the decision. Yes, it has been a loyal lamp, but really now…

After this, you need to evaluate any additional costs associated with the offer. The buyer may want allowances for painting and so on. It is usually fairly easy to bypass your emotions on this one, but you need to make some basic financial calculations. Take the offered price and subtract all costs for the transactions. One you have the net revenue figure, compare it to the bottom line number you decided on when you first decided to sell. This will tell you if it is an offer you should accept.

Homeowners often get so focused on the selling process, that they are caught off guard when an offer actually rolls in. Stick to your guns on your bottom line and you should be fine.