What does it really mean to “get a property under contract”?

You hear the words, but aren’t quite sure what they mean… or perhaps you don’t understand the process.

Believe me, I completely understand!

The thought of putting a property “under contract” used to make me anxious, too. At least in the beginning when first starting out as a real estate investor.

Let me simplify things for you.

– Putting a property under contract just means that you will be the only person who has the right to buy that property for a certain period of time. Tweet   (This gives you time to raise private capital or the deal if you don’t have the money right away.) The process starts with a written offer.

I share the secrets of putting a property under contract with you in this quick video:


What are the actual steps?

If you watched the video above, you already know the steps. Once you have decided where you want to find properties in which to invest and you are clear on why you want to be an investor, you get to make offers on properties.

Regardless of whether you are making an offer on a single-family property or an apartment building, the process is the same. The only difference is the size of the deal and the classification. For example, in the U.S., typically a multifamily property with up to 4 units is considered residential real estate; upon the 5h unit, however, it is classified as commercial. (I’ll teach you more about that in an upcoming article.)

Right now, just to make sure you understand the process of putting a property under contract, let me outline the steps for you here:

1.- Write the offer

This part tends to slow new real estate entrepreneurs down because it can be scary. Believe me, once you’ve made your first offer you won’t be scared any longer.  – It is human psychology that makes us fear what we don’t understand or don’t know how to do yet.  Tweet   Once we learn how to do something, we no longer fear it.

The offer is first made verbally to the seller. It’s just a conversation. If the seller is open to your verbal offer, you write it down. However, many times you will only make a written offer.

The conversations will take place afterward, for example, when you call to follow up on your offer. Because I am a long-distance investor, I look to my team to help me find properties. They have conversations with the sellers and give me the information I need to make a good written offer. Much of my conversations with sellers happen over the phone.

2.- Wait for the seller to accept your offer

It is not typical that your first offer will be accepted. There will be negotiations until both sides agree to terms. Honestly, I would be very suspect of a seller who immediately accepts my first offer. That would be an indication that things aren’t as they appear or there may be problems with the property.

When having these conversations with sellers, you want to make sure you’re speaking with the person or persons who have the right to sell the property; the person or people who legally own the property. Do a quick title search to be sure before spending time in negotiations. If you discover that the person you’ve been talking to about the property isn’t the rightful owner, well, that will cause pain and frustration. Avoid it. Do your homework before making the offer. (If you are working with a broker or agent, that person will do the homework and bring you the correct facts, because that is part of their job.)

If you are dealing with the legitimate seller, that’s good. If the seller and you come to terms of agreement, that’s great! You get to move to the next step, which is getting all the purchasing paperwork done. That’s where your broker or agent will come in handy. It takes a little time to move through the escrow period. That’s when you will do your extra due diligence (homework and research) about the property. It could take between two weeks (if you are fast-tracking the process) and two months. This period depends on your agreement with the seller; some sellers need more time.

In the meantime, you need to get your funding in order. That brings us to the next step.

3.- Put money into an escrow account

This is an account that will be used specifically for the purchase of the property. There is nothing scary about this part either; it’s just a necessary step. Whether you are using your own money or OPM (other people’s money), it has to go into an account to be held until the final purchase. For more specifics about this, call an escrow company in your area. They will walk you through the process. In fact, they may be the ones holding the money in an escrow account for you, because they will be a part of the process. (If you’ve ever purchased a home for your family, you know that there are a lot of papers to be signed, and the escrow company is where you go to sit and sign.)

If the purchase of the property is more of a creative acquisition, you may not need the escrow company. Because that is a topic for another day, let’s just leave it alone for now! I’ll just add here that this is what I love about real estate investing… there are many ways to get deals done, which keeps things exciting. No two deals have to be done the same way. That said, I typically follow the same process time and time again. It’s easier for me.

What then?!

Once you have a property under contract, you have the right to buy and hold the property, and then rent it out to tenants to earn cashflow month after month.

You have the right to sell the property as a wholesaler, which means you play middle man, putting seller and buyer together while earning a fee to do so at closing.

You have the right to sell or use the property in a creative acquisition strategy… for example, in a subject-to or lease purchase option transaction in which the seller remains on title while you find a buyer.

You have the right to do whatever it is that you and the seller have agreed to on paper. It all begins with making your offer!

This brings me to my question of the week…


When will you make your first or next offer?

If you need some guidance or hand-holding to get you through your first offer, I’m here for you. I work one on one with people just like you to help them get through their first deals. I can guide you through the wording to use in your offers and teach you about the rest of the paperwork that is needed. I can walk you through the steps.

Let me know how I might help you; I am at your service! Here’s a link where you can schedule a quick call with me: