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.

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Probably the most common way to finance the purchase of real estate is through the acquisition of new bank financing. The availability of mortgage loans varies based on economic circumstances, but this much is sure: It’s critically important for your purchase and sale agreement to stipulate the parameters of how you’ll work with bank financing as the buyer.

Here are some points to consider:

• What happens if you are unable to secure a mortgage loan?
• What happens if you are offered a loan but the terms, conditions or rates are unacceptable to you?
• What, if any, is the penalty you’ll face if you are unable to obtain suitable financing?
• Are you required to provide evidence to the seller that you have applied for mortgage financing?
• Are you required to use a particular lender and/or closing attorney/title company?
• What requirements will be made of the seller concerning compliance with the mortgage application process? (For example, how will appraisals and on-site property inspections be handled?)
• Can your contract be extended if your mortgage application is still in process at the time closing was originally scheduled?
• Who will pay the closing costs?

In general, my preference is to make all bank financing-oriented transactions in which I’m involved subject to my acquisition of financing that is acceptable according to my sole discretion. In other words, I want to have the right to terminate the transaction without penalty if the financing I’m offered isn’t consistent with my preferences, including interest rate, points, down payment, and other significant terms.

In short, be certain to eliminate any perceived or implied requirement for you to accept any financing you don’t like.

Bank financing is sometimes difficult to get and sometimes easy to get. But one way or the other, be sure to set up your contracts to protect you in the event that your financing doesn’t happen as you expect.

As always, thank you for reading FreeRealEstateTraining.com! Comments and questions are welcomed below.

A few days ago, I posted my thoughts about how to come up with a maximum offer price for your real estate purchases. My formula, which fundamentally involves buying property cheaply enough to have 20% equity after factoring in repairs, carrying costs and my assignment fee, is an effective formula.

However, it doesn’t work for every transaction.

For example, if you’re acquiring a property via subject-to and reselling via lease-option, what are the parameters you use for deciding whether you have a good deal?

Share your deal parameters here and let’s learn from each other! Here’s a chance to show off your skills and knowledge! Thanks for reading FreeRealEstateTraining.com!