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INVESTORS’ CORNER: Limit risk with early stage contract review

Would you like to save money & limit the possibility of risk, when buying a house, franchise, business or entering into a long-term contract?

            Your answer is undoubtedly yes; here is how.

After a homebuyer enters into contract to purchase with the seller, typically the buyer has executed two separate contracts, with two separate parties. The first contract, likely is with the real estate agent/ broker. The second, being with the home seller. Each contract carries its own obligations and potential sources of risk.

Likewise, a franchisee is likely bound by several different contracts. A contract with the franchise company exists, which supplies the terms of the franchise agreement. Additionally, the franchisee could have a separate contract with the landlord and, perhaps, even a contract with a lender. Each contract is an independent source of risk and governance.

A contract is a legally enforceable agreement. To have a valid contract an offer must be accepted and be supported by some sort of consideration (a bargained-for exchange).

Once entered into, terminating a contract can be very challenging. It can be very costly. Lawsuits frequently arise and time is hemorrhaged.

Pre-contract review is the key to saving money and limiting risk. Pre-contract review means having an attorney review the contract before you agree and are bound. Attorneys are trained to spot issues and red flags. By having an attorney analyze your contract before it is entered into, you can save great amounts of time, risk, and money.

Consider this scenario, You (the homebuyer) enter into contract with a real estate agent and a home seller, only to decide later that you do not wish to proceed with the purchase. The real estate agent threatens to sue and so does the seller – You are now faced with lawsuits from two different sources.

Pre-contract review could have prevented this. If, prior to entering into the contract with the real estate agent, an attorney had reviewed the contract then the risks and liability would have been known.

Pre-contract review prevents surprises. Conflicts can be avoided. Changes can be made.

Buying a home or franchise is likely one of the biggest investments of your life. Your due diligence should consist of pre-contract review by an attorney. By having an attorney review a contract before you agree and sign, you can avoid great risk and money.

Attorney Craig Morgan is a member of Metrolina Real Estate Investors Association, www.MetrolinaREIA.com, which provides education, networking, and mentoring to investors in the Greater Charlotte area. He can be reached at Craig@providencelawcarolina.com, (www.providencelawcarolina.com).         

           

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