Why is everyone avoiding straight options? I’d like to know what makes sub2 and/or l/o so superior.

Could I please get a reply on this?

When you take a property Subject To you are almost always dealing with a motivated seller.

If a person won’t give you title via Sub2, he is not motivated. He is saying he will only sell if you can come up with his high price.

You will rarely make money dealing with unmotivated sellers.

Since straight options are done, I suspect that would indicate that not everybody is avoiding them.

Options are very common in land deals and development deals.


I was more pointing to the lack of discussion on straight options on this forum. Everyone seems to be talking about l/o and/or sub2. Perhaps straight options are too easy to have questions about? I only saw Dee-Texas’ post.

My question is: what is the current attitude toward straight options as a tool combined with discounted mortgages from lenders on pre-foreclosure properties as opposed to short sales? I’m in the Toledo, OH area, if that helps. In OH, as in most states, short sales require a realtor’s license. Options, don’t. I’m hearing that lenders are being scared from straight options, and are required “source of funds” at every stage of the deal, to prevent double closings/assignment of contract. (In essence, the end seller should not be funding the middleman’s aquisition of the property. This, in my mind, nullifies the point of straight options in regards to using the assignment of contract clause to move properties.

True/False? Thanks.

I’m not sure how I see the relevance of this statement. What’s the point of owning the property and having to pay all the debts if you can simply control it? If someone is desperate enough for sub2, won’t straight options be just as palatable? Besides, they keep the house until they get the cash, just like short sales.


I think your logic is missing a few connecting links. Why would you want to control a property that was not a bargain? I can see a few commercial aspects, but not with residential SFRs.

A Sub2 seller wants out from under his payments now! That is only motivation to give you his deed. Ask this guy for an option, he’ll just laugh and shake his head. Give you an option to purchase some time years in the future? He wants out this month!

And in Tatertot’s response: the same holds true for a lender. The only reason he will grant a short sale is to get his money NOW! I mean, he’s looking at a foreclosure and you want him to stop and give you an option for sometime in the distant future?

And you have a lot of misunderstandings. Short sales do not require a realtors license. Lenders aren’t “scared” of options. Options are just an out-of-place tool that have no relavence to the disposal of his property. Proof of funds (not source) are required to make sure the buyer has the financial ability to close. If he can close, his method of disposal afterwards is immaterial to the lender.

I think you have read just enough to be dangerous. But keep reading – it’ll all fall in place.

Emperor, I can’t even make sense out of your question.

An option gives you zero control of a property. The seller retains full control of the property. In fact, at that point he isn’t even a selller, and you aren’t a buyer at the point you take out the option.

Let me give you a real life example of how an option works in real estate and how it is used. Real people, real property, someone I know well.

My electrician (and friend) has a small farm that has recently been included in an expansion of the urban growth boundary-- which means it can now be subdivided and houses built on it and before it couldn’t.

While the legal process was going on, it wasn’t dead certain where the urban growth boundary would finally end up, or when the legal process would finally be finished.

So a developer went to my electrican and offered him $100,000 cash for an option to purchase his property for 1.6 million dollars if and when the urban growth boundary was finalized and if the property was included.

In the meantime, my electrician contines to live in his house and raise his cattle. He gets option renewal fees of about $30,000 every year if the developer wants to extend his option (isn’t certain yet that he wants to buy, but doesn’t want to give the property up yet.)

My electricain can not sell the property to anyone else, because he has taken cash in exchange for his promise to not sell it to anyone else. He can not get more money if the value goes up, because he has locked in a price.

The delveloper has to pay in order to reserve the future purchase of the property.

In exchance for the option fee that the developer has paid, he gets locked in price in the future. He can exercise the option and buy the property, or if prices have crashed and the property is no longer worth 1.6 million, he can walk away and all he has lost is $100,000 and not his 1.6 million.

Now, if you go to someone who is in trouble and offer to give them a small amount of cash in exchance for tying their property up so they can’t sell it to anyone else, and you might buy it or you might not. In the meantime, all the expenses are still theirs. How interested do you think they will be? It doesn’t solve their problem, which is that they can’t afford the house and don’t want it.

The bank wants to get their money out. You show up and say you might buy the house and you might not-- you haven’t decided yet. How interested do you think they are going to be in putting in a lot of time and paperwork for you?

In a lease option, you are reserving a price, but you are also taking over the seller’s problems, so he no longer has to deal with maintenance and loan payments. (and I can’t see trying to do a lease option and a short sale on the same house. I wouldn’t lease a property and give rent money to someone who is in the process of losing the house)

However, if you can see a way to make a straight option work with a distressed seller, I think you should try it. Sometimes the guy who sees an opportunity that no one else sees is going to be the guy who makes the most money.