All About Contracts

Not if you want to, not maybe, but that you must.

Now, on the seller's portion, specific performance is essential. Because it states that the seller must, if you meet the conditions of the contract, if you show up at closing with the money, if you sign the documents, they must turn the property over to you. Without specific performance, here's what happens.

You tie the property up under contract, you do the diligence, you go out and find a lender, get the financing all together, you get the title work done and the survey, all your third-party reports. Get the appraisal. Everything's done. You show up at the title company. And the seller doesn't show up. He says, you know, I changed my mind. It was a good idea at the time, but in retrospect, I don't really want to sell my RV park after all.

And there you are left with all your third party reports and all your attorney's fees and you have nothing to show forth. That's absolutely unacceptable, right? That's why every contract you're sign must have what's called seller specific performance.

At the very end of the movie, they either say, Well, I changed my mind, I don't want to sell, or they say, I might still sell it, but I need an extra hundred thousand dollars or an extra fifty thousand dollars. Because see now they have you over a barrel because they know that you've done all your work and all your third party report fees. And that's just not fair. So you must never ever sign an RV part contract that does not have seller specific performance. You would be a fool to do that.

I don't care what the seller says. I don't care what the seller's attorney says. Without that provision, it's not going to happen. It's not a deal. You're not going to do it. So you have to have that language clearly in the contract.

But at the same time, don't let them flip it back on you and say, well, I'll sign specific performance, but you must also sign specific performance as the buyer. That is never the correct thing to do. Remember that the contract has something that you do which the seller does not, and that's called earnest money.

You have to write a check along with the contract to the title company for earnest money. It's not a huge amount. Typically in RV park deals, it's about one percent of the purchase price. So if you're going to buy that RV park for five hundred thousand dollars, then the earnest money would typically be about five thousand dollars. And what the earnest money is there for is that's the liquidated damages if you don't show up at closing.

So if you don't show up at closing, the seller really hasn't come with any out of pocket cost. You've paid for everything. You've done the survey and you've done everything. And so now when you don't show up, They get to keep the earnest money, and so it's not all terrible. They'll definitely, you know, take'em on vacation or

Do little home renovations with the money, whatever they want to do. But that's your skin in the name is the earnest money. You don't need to have earnest money and buyer specific performance. It makes no sense. Because you're the one, you're the party at risk in the whole deal. You're the one doing the due diligence, having to obtain the loan, having to jump through all these hoops.

So you're doing all the work and at the same time you didn't know the property that well when you put it under contract. You didn't know all of the skeletons in the closet. So as a result, you need to have the ability to get out. You can't have it that you have to buy it. Now, it's definitely true that for you to trigger buyer specific performance, you have to do some really stupid stuff because your RV part contract should also have a due diligence provision allowing you to cancel.

And a financing provision again allowing you to cancel. You really would only hit buyer-specific performance if you forgot to cancel during both terms. So if you never cancel during due diligence and never cancel during financing, but yet you didn't never get the loan, and yet you had buyer specific performance, well he could say, Okay, you gotta close after all.

Even if you don't want to, even if you don't have the money or the financing, you still have to close. And they could even then sue you to force you to close on the deal. Now, if you're so forgetful you can't remember the dates of when you're supposed to cancel. then maybe you shouldn't put the deal under contract to begin with. But let's just assume something came up in your life. You had an emergency of some type.

See you tied the thing up under contract, and you had a heart attack. You had a car accident. So your life was disrupted. You didn't know when those deadlines were. Or you were incapacitated. under a buyer specific performance contract, you'd have to close anyway. You couldn't say, Well, now wait a minute now. I had that heart attack and they gave me open heart surgery. I was in the hospital for thirty days and You know, I couldn't have possibly met my conditions of the contract.

Seller would say, Well, that's tough. You signed that n that specific performance, you gotta buy it anyway. So you can never be in that position. So you have to have seller specific performance always. You have to have never buyer specific performance ever.

That's what you have to have in the contract. Now, that being said, you also have to understand your state's laws. Because what if you don't talk about either in the contract itself? I've seen contracts that don't. They don't address seller specific performance, nor do they address buyer specific performance. Don't even mention it. In some states, if you don't mention it, you still have it. In other states, if you don't mention it, you don't have it.

So it's very, very important that you understand in your state with your contract what the ramifications are if you don't mention it. And that means that when you're talking to an attorney to draft your agreement, if you choose to do that, you have to make sure they understand the laws of your state.

You can't just use someone generically out of Texas to look at a contract in Iowa. Number one, they're not licensed to do legal work in that state anyway. But number two, they don't have a clue what the state law is. And the problem is you can see it could be pretty significant if you thought you didn't have buyer specific performance and yet you did, or that you did have seller specific performance and yet you didn't. So the bottom line is

Be sensible on contracts. Read every provision before you ever, ever submit a contract to somebody. Know your state laws like the back of your hand regarding such issues as buyer and seller specific performance. and never, ever sign an agreement that has either seller specific performance missing or the inclusion of buyer specific performance. It's really not a negotiable item. There are some things in contracts that you can say, well, I can bend the rules a bit on that. I should be okay.

This is not one of those occasions. This is not like someone shortening your due diligence provision from thirty days to twenty. It's not like someone putting in some other condition that, you know, the park pickup truck that comes with the RV park actually the the old mama pop gets to retain it. Yeah, you can work around those things. You can still get a successful deal from that. But you can't mess up specific performance. The downside is far, far too vast.

You never want to get into a contract something you cannot live by and you can't abide by, and that's where you'll be if you violate these rules on specific performance. This is Frank Roth, the Army Park Mastery Podcast. Hope you'd enjoyed this. Hope you abide by these rules. Talk to you again soon.