Get It “All In”

By on May 30, 2017 in Real Estate Investing | 1 comment

            We rarely see the lawyers in TV shows spending hours carefully writing legal agreements. Getting all of the terms and promises in writing doesn’t make for exciting TV, but it sure makes for good business.

            As many of you know, I have the opportunity to get involved in a number of different kinds of real estate transactions. I was brought in on a transaction where apparently negotiations had taken place face-to-face, over the phone, and via email. Much, but not all, of what was agreed to was later incorporated into an agreement written by the parties, none of whom, at that time, had a lawyer. The agreement they wrote did not include the following statements:

“This agreement incorporates all of the understandings, agreements and promises between the parties. There are no outside understandings or agreements. All previous negotiations, agreements and commitments have been reduced to writing and are incorporated into this document. Any future changes in the agreement between the parties must be in writing and must be agreed to by all parties.”

            That missing language left the door open for other people to say, “Oh, but we also agreed to this, and we agreed to that.” What was interesting was that the things they “also agreed to” contradicted what was already in writing in this agreement. That made things very challenging, and it was difficult to get the deal done.

            What are some of the things you need to have agreed to in writing? When you are doing business with other people, be specific about who is going to do what and by when.

  • Who is going to put what money at risk and for how long?
  • How are they going to put their money at risk?
  • Who is going to be the decision maker in the new business as you move forward?
  • Who is going to own what percentages of the new business?
  • What type of entity is going to be established?
  • Who is going to set it up?
  • What is that entity’s tax status going to be?
  • What rights and responsibilities will each owner/investor have?
  • Where is it going to be domiciled?

             These and dozens more questions are all things that need to be contemplated, agreed to, and then put in writing before you really have a solid deal that can move forward to completion.

            Many people accuse lawyers of being deal killers. I approach every deal, however, with this perspective: if it is a deal that my client wants to do and clearly understands, then I want to help them get it done. It’s hard to do that when you don’t know what has been agreed to by whom, when, and for what reasons.

            Remember, if people beginning to work together cannot agree on the framework of these things, then there is no way they will be able to agree on how to run a business and how to work together on any investment opportunity.

    1 Comment

  1. Thanks Jeff, This is very timely and I will be contacting you in the near future to put together a solid agreement for working with my real estate investors on Mortgage Loan purchases. Curtis Cole

    Curtis Cole

    May 30, 2017

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