How does a option work?

General Real Estate Investing
1

Hello,

I know what an option is but how does it work?

Do you still do a purchase and sales contract?

Do you get the deed and have it left in escrow for when you buy?

What about a title search?

Thanks in Adavnce!!!

2

I assume you’re speaking of a Pure Option? Where you have the option of purchasing a property at an agreed to price during an agreed to time frame? Correct?
You can let the option expire worthless if you so desire.
Or, you can exercise your option to purchase by notifying the seller, and proceed like a normal purchase and sale. At this point I would contact the title company and tell them what is going on. They’ll tell you exactly what steps need to be followed.

3

Thanks for the info.

Do you do a purchase and sale at the time of the option?
I’ve read you have all the docs (deed etc) sent to a escrow comp while you wait to exercise your right to buy? Then you don’t have to see the seller again?

I guess what getting at is what if the buyer your assigning your option to needs different tems than you? Can that be changed?

Great Forum Thanks

4
Do you do a purchase and sale at the time of the option?
No. To secure the Pure Option all you need is a Pure Option Agreement. No other paperwork is needed until you actually decide to exercise that option.
I've read you have all the docs (deed etc) sent to a escrow comp while you wait to exercise your right to buy?
If I understand you, then again my answer is no. I'm a homeowner who has given you an option to purchase my property for $350K, and you have 60 days to do so. Why would I agree to place the deed in escrow before you send me notification of your intent to actually go ahead and buy my place? Never happen.
5

Thanks for your answer!

I guess I’m confused, I thought that you did all the paperwork and hold them (Purchase and sales, deed transfer etc) for reasons like, so the the owner can’t back out and you basically don’t have to deal with the owner directly again…I read this somewhere.
The lawyer sends it to them to date or it’s good until a certain time or something? There has to some kind of an accepeted price etc…right?

You would have all the paperwork sent to a escrow / title comp or lawyer a when you met the terms and exorcised your option you just payed and signed the paper work?

It souned good anyway!!! :bobble

More help would be great!
J.D.

6

Don’t make it too difficult. An option is a contract to make a contract. The option must show the price if the option is exercised. The price can be determined by a formula but if so, the formula cannot be ambiguous. Generally, options to purchase forms provide for the method of excercising the option, including any agreed upon sales terms and provisions for escrow and delivery of title.

7

Thanks for the info T.