Does Purchase Option Agreement make me a principal on the property?

I can’t seem to find a lawyer who can tell me whether or not securing a purchase option agreement makes me a principal and allows me to then market or sell the property to another person without being a realtor or broker. I’m in VA and am not a realtor. Told the option only allows me to sell or assign my option, that I cannot market or sell the property under an option. Idea is to obtain a purchase option, then bring in my buyer and double close keeping the difference between my option and what my buyer pays. Full disclosure to the original seller. No price inflation on the double closing. Final price should be just below market.

Any help here greatly appreciated. I was all fired up and ready to go, then got stumped by this “legal” question.

Many thanks in advance.

You aren’t an owner if you aren’t on the deed, but I don’t see why you can’t market the property in terms of your option to purchase.

If you can’t find a lawyer, you can pay the attorney’s hourly rate to research it for you and provide a legal opinion.

Who is telling you that you are not a “principle” in the deal with a purchase option? In my opinion, you are a principle, but the realities of the real estate market place today just make it difficult to sell a property you do not own.

A lot of title companies are refusing to insure title when there is a simultaneous closing. The buyer’s lender won’t finance the purchase if title can’t be insured.

If your buyer wants to use an FHA first time homeowner loan program, then the HUD rules require the seller to have at least 90 days on title or they won’t insure the loan. If they won’t insure the loan, then the lender won’t finance the deal. Many lenders with their own owner-occupant loan programs are incorporating the HUD rules in their own underwriting guidelines.

Many lenders are refusing to fund purchase loans if the owner’s name is not on the sales contract. They have been burned too many times by unscrupulous investors using a simultaneous or double close to flip property. Fannie Mae and Freddie Mac have also begun refusing to purchase mortgages when the seller was not the titled owner of the property.

You are just a victim of a tighter mortgage climate and the stricter underwriting rules in effect today. I suspect that the lender’s objections have nothing to do with you being a principle in the deal, their problem is that you are not on title to the property you are trying to sell.

The lenders are now extremely cautious. Some won’t finance the purchase if the property is a flip. Many lender’s underwriting guidelines now state If the Seller is not on title at the time the purchase contract is executed, the contract may not be valid. The lender won’t take the time and effort to prove the validity the contract, just refuse to finance the purchase.

You have a contract interest, so, about all you can do efficiently in this mortgage environment is sell (assign) your contract.

Thanks Dave I and BLL. The lawyer’s I’ve spoken to so far are UNSURE if the option gives me enough interest in the property to be able to market it without being a realtor and suggest having a lawyer research it. I have an appointment with an attorney who specializes in real estate, contract and business law. Sounds like I should focus my attorney time on a good purchase contrac with an assignment clause and an escape hatch just in case I can’t come up with a buyer. So how do you get paid with an assignment? What I want to do is guarantee the seller a price and get an agreement to keep anything I can bring in over that. Looking for a minimum of 5K but ideally 10-20K per contract. Any other words of wisdom? Thanks again for the responses.

The more you describe your strategy, the more you sound like you are acting like a real estate agent.

My thinking is the same as Dave. If you are collecting a fee for selling a property, then you are acting like an agent.

I think you’re trying to do a CA here ( cooperative assignment ). There is no double or simo. close required.
You come to an agreement with the seller and then pay them a token amount $1 now you’re a principle.
Once a T/B is found you assign them the agreement and pocket the Option consideration. You use an assignment form for this along with filling in their names on the Lease and Option forms.
Make sure to use a R.E. attorney if you must. herbster

Hummmmm…It sounds like a finer line than I thought (between investor and realtor). I was looking at the approach as a flip. I secure an option or contract for one price then bring in another buyer for a higher price. I was told that the contract or option is what allows me to basically flip the property.

Considered getting a realtor license but that means I have to work under a broker. Sounds like a longer road to financial freedom?

Cooperative assignment is a term I haven’t run into yet (yes, very new). I’ll ask the RE lawyer what my options are when I see him tomorrow.

Lots of great wisdom in this forum, wish I had more time to read and learn. 2 year old daughter and very full time job is making my education a bit slower than I’d like. Many Thanks for the help out there!


What I want to do is guarantee the seller a price and get an agreement to keep anything I can bring in over that.

This is the statement that says you are acting as a real estate licensee. In real estate jargon, you are describing a “net listing” agreement.

Dave T… I would be guaranteeing the seller a price via the purchase option or purchase contract…does that still say “realtor” in your mind?

I did talk to an attorney Tuesday. Here’s a rundown from my notes. Maybe someone else will find this helpful and hopefull not questionable since I did pay for the consult:

Option to Purchase Agreement and the Purchase Contract both provide equitable interest in the property so we can market the property to another buyer without being a Realtor.

If you use a Purchase Contract to secure equitable interest in the property, then you’ll want to do a double closing. It costs you more because you have to execute as buyer and as seller, however, it’s cleaner and easier. As long as the prices aren’t inflated, the lender shouldn’t have an issue with it.

Do Not ASSIGN a Purchase Contract. You run into title insurance problems if you try to assign a purchase contract. The buyer’s mortgage company will want title insurance with the sellers name on it, but since you have a purchase contract, your name turns up and not the sellers…you basically get into the middle and mess things up.

If you’re going to do an assignment, use a purchase option agreement

Hummm I think you guys pretty much told me the same things in this forum for free. :slight_smile:

No, if that is as far as it goes. But, when you added “and get an agreement to keep anything I can bring in over that” to the structure of the deal, you became an unlicensed real estate agent by my say of seeing things.

Thanks Dave T. I will keep that in mind when structuring the deal. Lots of little things that can get me into trouble. I’ve decided to go ahead and get a real estate license. Going to do it on line due to work and family constraints. Still trying to decide the best approach to take in real estate but am already learning things in the license course that will help me as an investor or realtor. Thanks again for the patient responses.


As a long-time RE Broker I can tell you from experience that becoming a REA will give you additional problems and issues to deal with so it’s sure not a cure-all.

The education you’ll get becoming a REA will be very beneficial to you and you’ll learn a tremendous amount about REI, etc.

But I (as a retired lawyer with lots of years of REI experience) will tell you that you can legally market and sell ANYTHING you own…whether a deed, a mtg, an option, easement, right to trees or timber or oil on the RE, etc…as long as you openly disclose just what you own so as to deceive nobody

You might want to consider completing the real estate licensing course just for the education, but not sit for the license exam.

I really like Dave’s last responce to this. Basically Realtors have their code of ethics they need to adere to, which may hamper your RE investing a little.
Although this is my favorite REI site you could learn more about this at Herbster

Don’t overlook the lease option forum at this site. There is a wealth of information there, too.

I believe, an option does give you ownership interest. You have the right to buy, but not the obligation. The seller has the obligation to sell to you at a predetermined price. If you find a buyer who will pay more, nothing he can do about it.

You are not a broker who is licensed and obligated to represent the seller’s best interest and collects a commision for finding a buyer.

I bought a house from an intermediary who had ownership interest and there was a simultaneous deal all sitting at the same table signing documents at the closing. Your lawyer will know how to arrange the paperwork for the closing.