Essential Contract Clauses to Protect Yourself When Paper Flipping Houses or Wholesaling

When you're wholesaling or paper flipping houses, having the right contract in place can make or break your deal. A solid contract not only outlines the agreement but also protects your interests as a wholesaler. Whether you're working with motivated sellers or assigning contracts to cash buyers, it’s important to include specific clauses that offer flexibility, reduce risk, and keep you in control.

Essential Clauses for Successful Wholesaling

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So what are the Essential Clauses that you should include in your paper flipping house contracts?

Inspection or Due Diligence Clause

This clause provides you with a set period (e.g., 7-14 days) to inspect the property or conduct due diligence.

Why it matters: If something unexpected arises—like major repairs or title issues—you can back out without penalty.

Contingency Clause

Contingency clauses are “escape hatches” that make your obligation to close dependent on certain conditions. Common examples include:

• Financing contingency: Protects you if you can’t secure funds or an end buyer.

• Title contingency: Gives you the right to walk away if the title isn’t clean.

• Partner approval contingency: Allows you to back out if your “partner” (often your buyer) doesn’t approve the deal.

  
  

Earnest Money Clause

This outlines how much money is being put down to secure the contract and under what conditions it’s refundable.

Why it matters: This limits your financial risk if the deal falls through.

Assignment Clause

This is critical for wholesalers. It gives you the right to assign the contract to another buyer.

Key tip: Make sure it’s clearly stated that the contract can be assigned and that you’re not required to personally close.

Exit Clause or “Weasel Clause”

An exit clause allows you to exit the contract under broad or flexible terms. Examples include:

• “Subject to partner’s approval”

• “Subject to final inspection”

• “At buyer’s sole discretion”

  
  

Warning: Use these clauses carefully and ethically to avoid being accused of acting in bad faith.

Closing Date Flexibility

Include wording that allows you to extend the closing date if necessary—especially helpful if your buyer needs a bit more time.

No Obligation to Close Clause

This clause states that you’re under no legal obligation to purchase the property if certain terms aren’t met. This protects you if your end buyer backs out or funding falls through.

Disclosure of Assignment Fee Clause (Optional but Recommended if you wholesale in a disclosure state)

This outlines your right to earn a profit through the assignment fee, keeping everything transparent and avoiding drama with sellers or buyers.

Governing Law Clause

This clause specifies which state laws govern the contract—important for clarity if matters escalate to court.

Importance of a Solid Contract

A well-structured contract not only safeguards your interests as a wholesaler but also ensures a smoother transaction process. Understanding and implementing these clauses is vital for anyone looking to be successful in wholesaling or paper flipping houses.

How to Ensure Your Contract is Effective

To make sure your contract works for you, consider consulting with a real estate attorney. Their expertise can help tailor the clauses to fit your specific needs. Moreover, you’ll gain peace of mind knowing that your contract is legally sound.

In addition to the clauses mentioned above, it is crucial to stay informed about the real estate market. This can help you negotiate better and spot potential issues before they become problems. Being proactive is an essential strategy for successful wholesaling.

Conclusion

In conclusion, the right contract can significantly impact your wholesaling success. It protects you and provides the flexibility needed in a dynamic real estate environment. Make sure to incorporate these key clauses into your agreements to minimize risks and maximize opportunities.

The information in this article is based on the experience and opinion of the author. Due diligence should always be done before investing in real estate.