Hello,

In your last lesson we discussed how to protect yourself from long timeline delays.

This lesson will focus on how to get hard contracts with developers and why you should avoid reservation agreements.

Deadly Mistake Number 9:
Signing reservation agreements

I mentioned this issue briefly in lesson two, but it is important to discuss further. Reservation agreements are designed for the benefit of developers. By signing a reservation, you have no benefit other than the ability to cancel before signing the actual hard contract.

If you negotiate the deal from a position of strength (as part of a group of buyers like we've suggested) the actual contract will allow you the ability to cancel under numerous conditions. The reason developers use reservation agreements is so they are not obligated to anything unless they successfully pre-sell the needed units to get their construction financing.

Often developers who are in strong markets will cancel reservation agreements signed by early buyers and sell them at higher prices to other buyers at a later date. In doing so, they have used you and your money to their advantage and left you with nothing but a big waste of time.

Under normal circumstances (as an inexperienced buyer) you would sign a reservation agreement...especially if you were buying at the beginning of the pre-sale process...in order to get the biggest discount. But this discount comes with a price as you will be waiting until all of the pre-sales are completed before you will ever be sure you can buy the unit at all.

Often developers will only require a small deposit during the pre-sale. Maybe five or 10 percent of the purchase price...with more required when you go to contract. While this may seem like a good compromise, you will still usually be subject to a larger deposit than is necessary and you will play the waiting game.

The best alternative is to negotiate with the authority of a large group of buyers and go right to contract when it is clear that the project has a high probability of starting construction over the next four to six months.

If we buy 30 or 40 percent of a project, the first thing the developer usually does is put out a press release announcing the project and the fact that they sold hundreds of units on their very first day. This builds credibility for the project and brings other potential buyers to the developer's sales office...wondering why the project is so hot. The large quantity of units we buy all at once will help the developer sell the remaining units needed to get his construction loan. This helps the developer and speeds the process along for us as well.

Our investing group management is in negotiations with dozens of developers every week. They will usually select only one project for every 100 developers interested in gaining access to our partners.

As joint venture partners, we don't hear about projects under consideration until the developer has convinced the group due diligence team they have satisfied all of the necessary requirements to be ready to break ground soon. In doing so, a reservation agreement becomes unnecessary. Of course we enjoy all of the other protective terms we've discussed as well.

In lesson 10 we'll discuss the risks of pooling money with other investors.

Feel free to call me anytime. We don't sell any products or seminar tickets. We're a private investment group committed to education and partnership. Our purpose is to provide you with a comprehensive education so you can properly invest in what we believe to be the greatest opportunity anywhere for intelligent investors...pre-construction real estate.

Respectfully,


(847)793-0146
Joint Venture Partner
Senior Executive Advisor, BPV
Founder, PreConstructionSecrets.com
President, Freedom By Design, Inc.

P.S. To regain access to your 12 page report and the pre-construction audio explaining the details of our investing club, simply click here.

P.P.S. If you are a real estate developer or know developers who are looking for project funding, please give me a call. Our buying club may be interested in acquiring a large percentage of your pre-construction units.

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