I use options often in this type of market. You can tie up a property for as little as $500 (or less, I use $500 because it gets people interested)and then bring in your buyers. This has been discussed here often. You can search options and get the nitty gritty.
One of the things I’ve run into is “the first time home buyer” who wants the house I have optioned. I’ll have my lawyer take a deposit on the home and have the buyer and myself sign the option assignment. Very basic stuff.
Recently I had to deal with a situation, a bank that was lending my buyer his money did not want ANYTHING on the HUD 1 form about the option. I’m usually on the HUD 1 and my money is paid to me at the closing.
This is where a good lawyer is worth every cent. My attorney went to City hall where the home was located and recorded the option and attached it to the title. This way when the closing attorney does the title work my option shows up. This protects my rights under the option agreement. Basically, it insures I get paid, and satisfies the bank issue with the HUD1.
I’m sure most of you guys know all about this, but I figured I’d thow it out there for anyone getting started.
In a falling market options can give you HUGE leverage with a pre-defined potential loss and unlimited upside profit.
Home in example was optioned for $500 for 60 days, at $100,000, sold within 10 days to first time buyer for $119,000. Closing is tommorow. $500 option plus $900 in attorney fees =$17,600 profit and I never owned the home.
In this type of market options can give you a great way to make money without having to actually buy these homes. If I had done this as an outright buy, I would have had holding, closing and monthly payments to deal with if a buyer had not been found so quickly. this way worst case I’m out $500 if I can’t find a buyer. Even the lawyer fee’s don’t come into play until you have a real purchase.
Another tool in the toolbox, that’s all it is.