Option period contract question

[ballgum]

I'm just curious what others are doing. I assume alot of you are using the option period as an escape. I have heard several people say that they just set the option for 10 days or so because it's enough time to know if you got a deal. My question is, why only set for 10 days though?

I mean, if you got over that 10 day period without closing, are you not locked in and obligated at that point to buy the property or do you still have some kind of way out of a wholesale deal?? It seems like it would be better to just extend that period out to like 30 days just to CYA?

[ericmedem]

I don't know if you are talking about an option period covered under a lease option agreement or an escape clause period covered with a contingency.  Most of the time people use the 10 day escape clause method because many of the banks will allow up to 10 days to inspect the properties.  If you try to extend an escape clause period outside of the typical period you may have alot of difficulty.

If you are talking about a lease option period I typically use a 30 day, and yes when it expires unless I cancel it then I am obligated to follow through on the contract.

In both cases be sure to get a non refundable deposit from your buyer equal to or greater than the amount you stand to lose if they decide to back out of the contract.

[ballgum]

Ok, sorry. This is for wholesale assigning and used as an escape if I don't find a buyer or if buyer falls through.

My question isn't as much pertaining to losing my earnest money as it is to being legally bound to purchasing a property since that is my escape? If my option period is for 10 days and my buyer falls through on day 11 for instance, then I've already passed the deadline I have to ESCAPE out of the contract??

[rgchamb]

I'm in TX & I've used option periods on the contracts.  Bottom line is you can put whatever period you & the Seller agree to.  For motivated Sellers, I've found that they don't really care what you put down.  My contracts are usually for 30 days & my option period for 2 weeks.

[ballgum]

Hi, thanks for the reply. I still have questions however.

I'm in TX & I've used option periods on the contracts.  Bottom line is you can put whatever period you & the Seller agree to.  For motivated Sellers, I've found that they don't really care what you put down.  My contracts are usually for 30 days & my option period for 2 weeks.

You say you typically do 30 day contracts with 2 week options. My question is, what happens if you can't find a buyer OR your buyer falls through after your 2 week option period runs out?? If that is your escape clause, are you then obligated to buy the property since your option period was only 2 weeks and your contract is for 30? This is unclear to me as to why people are setting their option periods to less time than the contract time and if there is any legal obligation OR if I can simply walk from the deal even after the option expires?????????

[ballgum]

If you are talking about a lease option period I typically use a 30 day, and yes when it expires unless I cancel it then I am obligated to follow through on the contract.

Two questions on this response.

1. If you can't find a buyer or the buyer falls through during the option period, do I need to send a notice to cancel the contract at the end of the option period or can I simply just not do anything?

2. What happens if I find a buyer, but the buyer falls through AFTER the option period expires? Am I still then legally obligated to purchase the property since it's still under contract but expired option?? I am confused as to what exactly you guys are saying or what your doing to escape a contract in certain situations. If this is the case, how exactly are you guys escaping contracts AFTER an option period?

[rgchamb]

Ok.  Sometimes I use an option period, sometimes I don't.  Yes, it is a good idea to have your option period match your closing date or come close.

I had a situation where my option period expired & I still didn't find a buyer.  I tried to negotiate a lower price, but the Seller said no.  However, I had built a good rapport with the Seller, he was willing to give me my earnest $ back & let me back out of the contract.

Here's what I did:  I paid $25 for an additional 10 day option period during which I searched for a buyer.  I ended up finding one, assigned the contract, and walked out with about $3.5K.

The worst case scenario is that your option period expires, the Seller doesn't want to give you back your earnest $.  So therefore you are in default of your contract.  If that happened to me, then worst case is I lose my earnest $.