This is part of the Real Estate Contract Fundamentals Series. I’m not giving you legal advice - you’ve got to get that for yourself from a qualified attorney. To get a free copy of the Real Estate Purchase and Sale Agreement upon which this series is based, visit the Monster Purchase And Sale Agreement Download Page.  Real Estate Contract Training For Investors.

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The 3 most fundamental issues handled by a real estate contract are:

1. Identification of the Buyer
2. Identification of the Seller
3. Identification of the Property

All of these seem straight forward but are more complicated than they initially appear. For example, consider the notion of identifying a Buyer.

If you’re a real estate investor seeking to acquire a property, identification of the buyer in your Real Estate Purchase & Sale Agreement isn’t necessarily obvious. Here are some of the alternatives:

• Identify yourself personally as the Buyer
• Identify a corporation, LLC or other business entity owned by you as the Buyer
• Identify a trust or other third party entity which you do not own (but over which you have control) as the Buyer

How do you make the choice of who should be Buyer? This is a question only your attorney, accountant and financial advisor can answer. But I’ll give you some general guidelines here:

• It’s almost never a good idea to be listed personally as the Buyer on a real estate contract. The liability is relatively high, while the benefits (property ownership and potential profit) are easily achieved in equal measure when using some other entity as Buyer
• The tax ramifications for the use of corporations, LLC’s and partnerships can vary tremendously. For legal liability reasons, it’s generally a good idea to use a legal entity as the Buyer in your real estate transactions, but the specific choice of entity is a decision you should make in concert with your legal and tax counsel
• Some people use living trusts as a vehicle through which to enter into purchase and sale agreements. Consult with your legal counsel before taking such an action, since the nature of value of trusts varies dramatically based on the language in the trust

As in all matters, the best path is to simply consult with your attorney. However, suffice it to say that the issue of selecting the best Buyer for your next real estate acquisition must be done with great care.

In the next installment of the Real Estate Contract Fundamentals series, we’ll examine identification of the “Seller” and the most common (and serious) errors made by real estate investors in this part of a real estate purchase and sale agreement.

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