Can someone lay out an option scenario for me? I’m familiar with the lease option, but not too clear on straight option. I’m looking to sell a house here in Minneapolis and was considering a lease option. I’ve read a few posts here about options, but I’m still a bit unclear on the contracts, players, and timelines involved. I’d really appreciate it.
Take the lease out of the lease option and you have a straight option. Any option, no matter what you call it is simply a right but not an obligation given to one party by another usually in return for consideration (fee). I can buy options on stocks which give me the right to purchase a security at a set price within a specific time frame. A purchase option on a house is the same thing, it give me the right to buy that house within a certain time frame at a certain price. But the option cost me money because it is giving me rights that I did not earlier have. If the buyer does not exercise the option before expiration you keep the option fee and they go away.
So I would option a particular property for, say, 60 days for a purchase price of $150k (just throwing out numbers here). I get it in writing and likely pay something to homeowner for this option ($500 is a number I think I’ve seen, but whatever gets the deal done within my numbers). Ideally, during that option time, I find someone to buy the house for, say, $175k. I execute my purchase then resell to my buyer? Or, can I contract with the seller in a manner that doesn’t require my purchase of the prop but still get that profit I was able to find?
I think I’ve almost got my mind wrapped around this one, but not quite sure. Either way, sounds like an R.E. attorney would be worth their money if I had something I was interested in.
Sounds like your about there. You could do a double close, you buy the property at option price and immediately sell it for retail price. Or you could write the option as assignable then just assign the option to the end buyer for a fee. I’ve never done this so others may have thoughts here. A good RE attorney can always be a benefit.
In Texas the TREC (Texas Real Estate Commission) contracts have a paragraph for an option period. This gives you the right to cancel the contract at any time for no reason during the option period when you pay the option fee. In my opinion, this works much better than an option contract for a few reasons. First, it is a contract form that the seller, Realtors, title companies etc are comfortable with. Second, the terms of the purchase are there if you decide to buy the property.
The main difference is that everyone is happier with a contract to purchase with an option to cancel than they are with a simple option to purchase.