I am meeting with a seller tomorrow to put a home under an option. I’ve never just used an option before. Once I find a buyer, do I need to draw up a purchase agreement and then assign the contract? Or, do I just assign the option and let the buyer and seller move on from there? Any help would be appreciated.
I am new and I have never done it, but from what I have read, you assign the option contract to the end buyer using an assignment contract. You can get paid your entire assignment fee at the time you assign the contract or you might get a deposit then get the balance at closing. If you are getting the rest of your fee at closing, I would make my assignment contract non-assignable, so that you know you are working with an end buyer who can close on the sale and be sure you get paid.
Make sure you disclosed everything to the seller like you do not have funds to buy and that you are a broker looking for a buyer…
I always heard that you should not describe yourself as a broker or an agent since they need a license to operate but that instead you should emphasize that you are a principal in the transaction and that you plan to assign your interest in the contract to another party for a fee.
If one is not an agent or a broker, why would they tell someone that they are?
If you are, you can get into serious problems for not disclosing. Agents/brokers are deemed as having ‘special knowledge’ and not disclosing can be seen as taking advantage of someone that knew no better…
Keith
Sometimes when I talk to a homeowner and explain that I plan to assign my contract to a end buyer, they say, Oh you’re an agent or Oh you’re a broker. I make sure to correct them, telling them that I am not an agent or a broker, that I am acting as a principal in the transaction, that they will be entering into a contract with me, and then I will assign my interest in the contract to another person for a fee. Because I am not licensed as a broker or agent, I make sure that the homeowner does not think of me as such.
If I did have a license, however, of course, I would have to disclose that I am licensed, but still clarify what role I would be playing in the transaction, and what my obligations would be, i.e. that I would be acting as a principal representing myself and my own interests only, and not acting as a representative of the seller or the buyer with no obligation to act in their best interests. However, I am new to this, so please tell me if I have that wrong.
Just remember just because you put it under contract the home owner can still sell it to who ever they choose that come along with cash because it is still on the market until you lock it in with cash EM.
Kelle711, when you make an option offer, always include a negotiated amount of consideration, the amount dependent on the circumstances and your feel for the deal and, of course, your resources. That immediately makes the contract binding legally.
Here’s a sample assignment of option document (in .pdf form). Your buyer pays you money to be assigned to the option agreement you entered into with the seller. I’ve personally never recorded an option but that act can serve to placate some potential sellers and/or buyers.
I’ve only sold one of these myself and I essentially got paid at time of assignment for the end buyer to take my place. Due to the vagaries of the purchase process and the potential for the option to run unexercised, I wouldn’t want to wait and be paid in escrow. Show me the money now. If the amount was impractical to cash out at the moment, then I might consider cross-collateralizing property of the optionee in a DOT/note. Good luck.