I understand the difference in a Purchase Contract vs. Option Contract, purchase contract is a agreement to where I have agreed to buy a peice of property at a set price, Option contract is I have the exclusive option to buy, but not the obligation to buy. With that said here is my question…
If I get a property tied up with an option contract do I:
1 Open escrow or wait until I exercise my option?
2 If I opt to buy the property, do I have to complete a whole new contract (purchase contract) or what do I do?
Assigning Options:
1 If I find a buyer, do I assign the option to him, or exercise my option to buy, then assign a purchase contract to my investor? or does it matter…
2 If I do assign my option to an investor, he still isn’t required to buy correct? and if he opts NOT to buy, does he get the assignment fee he bought it for back from me?
You don’t open escrow with an option. However, depending how long you plan to hold it, you may want to record it. If you record it then it will show up in a title search and prevent the owner from selling to someone else before your option expires.
Yes, you would execute a purchase agreement and close before you option expires. That is the point you open escrow.
Assigning options
You can assign an option or setup a double close (lots more coordination)
If you assign an option your buyer should not expect a refund if they don’t execute it, just like you don’t expect your option money back if you don’t execute it.
TCwood
2) Yes, you would execute a purchase agreement and close before you option expires. That is the point you open escrow.
commenting on the above statement, wouldn’t the option contract already have all the terms of the sale along with the buying price, why would I have to fill out a whole new contract?
Actually you have a good point, if your option spells out all the terms of the sale, then you wouldn’t need a contract in order to execute it. It depends on how detailed your option contract is.
I’m glad this topic came up, because I’m in a simular situation where I was able to convence the seller to give me 50% rent credit for 2 yrs on an option. In return I offered him 150k for his property which he was having an extremely hard time selling, because the property value had droped. The Comps now are at 141k and I’m paying 1100/mnth for 6mths then going upto 1400/mth there after. I would like to know if 1) how do I go about recording my option without the seller selling the property from under me?
2) Does this deal come accross as a good deal to hold onto to sublease and or sale to another buyer myself?
When completing an option contract, I also complete a purchase agreement at the same time; outlining the details of the sale.
I then give the entire file to my title company for them to hold until time of sale. Something nice my title company has started doing, and it has saved me a great deal of headache. When I give them the file, they have the sellers re-sign a copy of the purchase agreement, with Notary so there is no questions in the future and then, they have the seller sign a limited power of attorney to the title company. This eliminates the problems that can occur when the seller finds out how much you made on the deal and may refuse to show up and sign or delay closing another way. I have been in this situation, and now the title company simply signs for the seller because of the executed limited power of attorney. The other nice thing is sellers have been less likely to have a problem signing a limited power of attorney with the title company than they might signing one to my company.
Go Get’em!
Ray Rochefort, mgr. mem.
Purpose Investments LLC