For Example: If I have a contract that states I can close in 30-60 days providing partners approval, inspection, financing etc…My question is, Why would I tie up a sellers property for 2 months in hopes that I can assign the contract? Doesn’t really seem fair to keep the seller waiting like that.
2 months is the worst case senerio, you don’t wanna sign a contract that says you can close in 10 days…you need that extra wiggle room for example if a buyer backs out at the last minute you still have time to get a new buyer. Those other clauses are escape clauses to get out of the deal if you can’t find an end buyer.
I usually use an option to purchase agreement, which states I will use it to market the property to find an end-buyer. The sellers know up front, I’m not the one buying their property. I don’t need a phantom partner.
The agreements are for 45 days, but can change. I either find a buyer, during the period of the agreement and assign the option to them or it expires and I lose nothing.
this is the easiest method to use if your not doing REO’s and it’s really easy to get sellers to agree to it because your basically saying “Look dude, I think I’ve got some buyers for your house and if they want to buy it, you want to sell it, so were cool…but, if by chance my buyers don’t want to buy, your out nothing because you’ll be able to continue marketing your home up until either you or I sell it.”
Eric
You’re almost all correct - I’m not talking about using a flex option here, which would not tie up the property. I’m using a regular option which obligates the seller to sell the property only to me for X number of days. If they are a FSBO and already marketing their house and don’t want to tie up the property, I may use a flex option to purchase agreement.
I use flex option to purchase agreements when marketing other wholesalers’ properties.
I use options instead. This way I don’t have to get the seller thinking that it is a done deal. It also takes all of the pressure off of me having to scramble for a buyer.
There’s also no weazle clauses. I operate with honesty and integrity, so I won’t say a deal is subject to approval of my partner, when I don’t have one.
I know a lot of people have imaginary partners. One guru, who I respected a lot, lost some of my respect when he said the partner could be my dog. My dogs are loveable pets, but they’re certainly not my investment partners, unless my business has gone to the dogs (literally and figuratively).
That is why I say using an option to buy is such a cleaner way to buy from a seller. I just tell the seller that I’ll exercise my option and buy the property at the agreed upon price if everything checks out. That way I’m being up front with the seller and I have my price agreed upon in the contract. I don’t want to get the seller emotionally thinking it is a done deal just for me to really upset them by weaseling out at the last minute. OPTIONS OVER CONTRACTS WITH CONTINGENCYS ANY DAY! :bobble
Options sounds great but is there a way to get around the requirement of paying the option fee?
I was asking because I plan to do wholesaling only since I don’t have the funds or good credit to do other strategies but if I can do options without putting down some money that would be great for me.
Thanks,
Ed
I actually don’t even use them. I gave a seller a $10 bill on my first deal and the seller looked at me like I was crazy. The option fee may be used as an earnest money deposit or EMD. EMDs are used for consideration, which is part of a legal contract. Legal contracts need an offer, an acceptance and consideration. Consideration basically shows you’re not getting something for nothing.
My Option to Purchase agreements and Flex Option to Purchase agreements say I’m using the agreement to market the property to find an end buyer. This is time, effort and sometimes money to market the property. I’m also saving the seller the usual 6% fee that would be paid to real estate brokers for them to market the property. A 6% savings comes out to $6,000 for every $100,000 the seller is getting for their house. I think that’s pretty good consideration, don’t you.
Thanks for all the replies guys, I like being upfront and honest with the seller and avoiding the “weazle clauses and phantom partners” crap.
Help me understand this better so I can explain it to the seller …
-
I tell them I want the “Option To Purchase” their property.
-
I give them an “Earnest Deposit” say $10.00 -
-
I will “Exercise My Option” providing I can find a End Buyer?
-
If I don’t find a End Buyer within say 30 days, then our contract is expired.
Is this pretty much how it works?
Can the seller also sell to someone else during contract period?
Do you guys write up your own contract?
You don’t have to tell seller that your wholesaling the property. If the seller is truly motivated to sell, he or she truly only cares about you being able to close on the property at the agreed upon price. Your provision to exercise your price is based on whatever you want it to be that is acceptable to you. That is the beauty behind using options. I don’t have to give any reasons to the seller on why I might now want to close. What’s good about it is that if I have the option price higher then what other investors want to pay, I can go back and renegotiate to try and get a better price or if they say no, I just terminate my offer and call it a day. No harm no foul. You should always try to get the longest option period possible. Normally I always shoot for 45 days.If they don’t bite, then I’ll settle for 30 days. I’m going to know in two weeks whether I have the property under the right price that is appealing to other investors. Always give yourself more then then needed. In the worse case,you can use it as bargaining chip to negotiate away in order to get something else you might want. If you are working with FSBO sellers, they aren’t going to press you much on option consideration, some will be the exception to the rule. With an option, you have all the leverage in the deal.