Option to Purchase Agreement/Contract.

Is it true that in the state of California, it is illegal to use an Option to Purchase contract? If so, what can I use instead? If it is legal, can you use this “Option to Purchase” on any price range of home, from dirt cheap to even luxury homes?

Please reply, I really need to know.

Fabian G.

I don’t know about California Laws but I use an Option to Purchase on just about everything. LO’s LC’s CFD’s Cash and even sub2. The price is no issue, more the better I can make more that way. Herbster

It may be. A contract of sale is much better as long as you understand what great clauses to put in it. A contract of sale with a contingency is so much better than an option to purchases. I use a 1 page “delayed contract of sale” I call it my “skinny” it works every time.

Wishing you good luck….Charles Parrish

Good grief no, not illegal in California. Who told you that?

Charles, Your delayed contract. How does this work if you would please.
Thanks, Herbster

No not in Cali. I no 5-6 full time investors who use options to close shorts there.

From what I know, Option To Purchase Contracts are not illegal in the state
of California. Please check with your local Real Estate Association or attorney
to verify this, however.

Yes, you can use Options on any kind of deal, but you definitely don’t want
to use it on EVERY deal…

Some deals, if you try to use an option contract, the seller won’t take you

There are certain types of deals that Options will work fantastically well with.

What types of deals are you trying to do?

Find a CA investor who does Lease Options, maybe at your local REI Club. I’m sure they will help you.

I plan on using them in Reo’s.

You have to submit REO offers on a specific contract- they will not let you use an option.

The listing agents will be able to provide you with the correct contract to submit your REO offers on. Where I am (Tampa) it has to be submitted on the FAR (Florida Association of REaltors) As-Is contract.

Steph :cool

I’ve never heard of any banks accepting Options. All you need to
do is ask the listing agent, and they will provide you with the
appropriate contracts, as Steph mentioned…

Jeff Corpuz

Steph & Jeff,

What do I tell the listing agent? That I plan wholesaling this deal and using non of my own money? I apologize im just trying to get in the game with wholesaling REO’s and just want to be sure.

I don’t ever tell the listing agent that I am wholesaling the property. They don’t need to know.

All they care about is that the deal gets closed, so you need to make sure that happens.

If you haven’t already I would suggest spending some time and getting to know your market. Have some buyers lined up ahead of time so you can unload your deals quickly. It will make things much easier.

Good luck,
Steph :cool

By the way I really like your website, it’s very well put together.

My question: Is wholesaling REO’s harder or more technical than FSBO’s? Alot of paperwork? You say that the agents don’t need to know that i’m wholesaling. But you told me to ask them of the paperwork i need. Which documents do I need because i previously used “options to purchase” on FSBO’s. It is a must to wholesale REO’s since there is sooo many of them.

Never ever tell any real estate agent that you are wholesaling the property unless you want the deal to blow up. They don’t understand creative real estate and they are not too keen with somebody tying up a property contingent upon finding a buyer.

Steph is speaking about the specific forms that realtors use to submit offers. In Tampa they use FAR forms, where I’m at in Georgia we use GAR forms. The listing agent or your buyers agent should be well able to give you the forms you need to draw up your offer. Actually they draw it up for you with your terms, send it to you via email for your review, you sign the signature page and fax or email it back to them. They submit your offer from that point.

Wholesaling is wholesaling. It’s not much different whether it’s FSBO or REO. REO has a little bit more paperwork involved and banks are less flexible than private sellers in the amount of different ways to construct a deal. On reo you don’t have to record your option at the courthouse, but on FSBO you do if you don’t want somebody to steal your deal.

We never really use option contracts, just use AOS with very small deposits. Our deposit is $10. Options have a place, but if you are using them because you are nervous about wholesaling, just let the homeowner know your intent at the time of signing the AOS with them.

Can you use the same method in Illinois…or is it illegal…I’m new in RE…so would I submit an offer with my specific options to the real estate agent of an REO …and is this no money down?..

He is speaking about FSBO contracting. You really can’t do options on REO, but possibly on short sales.

You will get laughed into kingdom come if you try to submit 10 dollars as an earnest money deposit to the bank and realtors. The standard is $500 to $1000 minimum

On FSBO you can do options or whatever you want that is legal and fits the design of the deal structure. You most times can get away with no earnest money or one to ten dollars.


Yes, there are more hoops to jump through when you are offering on REOs. You will need one contract to submit to the bank when you make your offer (get this from the listing agent), and then a contract to sell to your end buyer (this will be your own purchase and sale agreement).

The paperwork that I was referring to is the actual contract that you will have to use when you submit your offer on an REO. You can’t pick which one you use. They will have a specified contract that the bank will require you to use. You have no choice in the matter. You need to submit your REO offers on the required contract, or else they will not accept it. The listing agent will be able to tel you which contract is needed.

This doesn’t mean that you have to tell them you are wholesaling the property. You are just finding out which contract to use so you can make the initial offer…


You will need an earnest money deposit, usually 1k or more, if you want to submit an offer on an REO. It is perfectly legal to wholesale in IL, btw.

Steph :cool