I’ve been following posting on another board about a straight option that has the optionees stressed to say the least. They are always fighting fire because part of the contract saying buyer has first right of refusal if seller finds a buyer. I’ve got Bronchicks options, Lisa Moren options, the list goes on and on but have never used any of them. I want to start doing options and making some cash but not if the options cause more problems than they are worth.
Could someone tell me the wording that they use and have used successfully?
Do you always use a locked option or give the seller the option of finding a buyer while you have an option?
Sorry, this question is probably clear as mud but I’ve read and read and still not entirely sure about some of the contract.
I don’t understand WHY you would want to structure the option that way? It defeats the purpose of having an option in the first place.
Am I misunderstanding your post?
I’ve done both. Typically, I offer non-exclusive options because it simply provides the seller another potential solution without forsaking whatever it is they’re already doing. That said, it depends on how much time and money I plan to spend and the seller as well. Some sellers are more than willing to sign an exclusive agreement just to have someone else take on the hassle.
I would suggest having both the exclusive and the non-exclusive agreement include a clause that the seller will reimburse you for all expenses incurred as well as pay you a “go away nice” fee. This is easily discussed up front and I’ve not had a seller balk at the idea. It in essence converts the exclusive agreement into a non-exclusive agreement since there’s now a buy-out provision.
However, I’ve not had to request any sellers pay the termination fee yet, either. Prior to adding that clause, I have had sellers reimburse me for expenses which is what led me to add the termination fee. I was tired of the effort just to breakeven.
Hi Tim -
I think the discussion here regarding options illustrates that most of the RE folks don’t know the how, when or why to use them.
Properly used (and drafted) they are as strong (enforceable) as any other RE instrument.
I think RE people become confused as to what it is they are trying to accomplish.
Do you want control? to lock in future profits? to contain pricing by limiting the competition?
Options have been used to do all of that and more. What they cannot do is substiute for ill conceived strategies, lazy thinking or poor execution.
Glad you joined us… :mrgreen:
My experience with options is fairly limited and I think that holds true for many folks that frequent the REI boards. I realize they are used often on larger deals as well as small. I would hazard a guess that most of us have never seen a properly drafted option, at least not one that would cover all the necessary aspects of a large deal.
Anyway, just wanted to say “welcome” and I look forward to your contributions…they always make me think. :brow
Hi Tim -
Thanks for the welcome.
The words “propertly drafted” probably hold far more meaning to attorneys that they do for us regular RE investors.
And after rereading my earlier post, I’m not sure I made my point clear enough.
All of us have dealt with options in the past and will continue to do so in the future – we just don’t always realize it.
For one thing, few “options” are presented to us complete in legal format with a bold imprint across the top spelling out the word – “OPTION”. For example, if you purchase a property in Texas using a CFD, you also get the benefit of a very powerful (and court friendly) option. Of course, there are other limitations that may lead you to choose a different path, but for the buyer, the CFD is an option contract whether or not we choose to recognize it as such.
There are some good reasons for not labeling options; one is to lessen the pain of uncertainty. That’s a good point for most RE folks to keep in mind.
What I really meant to say is that most RE people (and some others) often are unclear about what they want to accomplish and more importantly, how they plan to go about it.
Options are amazing tools and I use them all the time – large deals and small. But they’re not a “wonder drug”.
Just my .02
Yes, even the standard REALTOR contract promulgated by TREC here is an option contract. And it seems to me there would be some fallout if it said “Option” at the top… :deal
As far as what I want to accomplish, unfortunately, that frequently changes by mood and day of the week… :biglaugh and I’m certain that holds true for others as well.
BTW, it’s ball season again. You coming down anytime soon? I’ve had a standing offer for a meal out there for a LONG time. Ready to take me up on it?
The fact that most of us change our minds about what we want from time to time is exactly my point. The tools we use and, in the case of options, the language should reflect those changes, don’t you think? or at least try to anticipate some of them?
What’s funny is that so few of us change our methods. We just keep on keeping on. Doing exactly the same thing and yet expecting different results.
Like your board – looks like you’ve put a lot of thought and work into it.
As for Austin, I was there about a month ago, but tax season is upon us – so my time is not entirely my own.
In any event, I’ve got a couple of grandkids to entertain next week --Spring Break – while the boss (my wife) is away working. There may be an opportunity to get down there soon, I’ll let you know.
PS - I’m gonna keep trying to get Alcorn down for a visit sometime in the Spring or Summer. Austin would be a great meeting place. A few of us had a great time a summer or so ago thanks to Chuck Perry (I haven’t forgotten you, Chuck). We missed you.
PPS - about that TREC thing, you got it exactly right. The word OPTION would not be welcomed by most parties – not the Realtor, the Seller, nor the Purchaser. I can’ t imagine that the lenders, title folks, or the attorneys would be too pleased either. But that’s to be expected, is it not?
I change my docs all the time, probably to a fault. And my methods, probably to a fault. I’ve come full circle as I use to rant against the cookie cutter mentality because I wanted to do one of everything - I wanted a toolbox that was huge. My partner calls me “Tink” as I tinker with everything. I call it my “Improvement Flaw”.
Now, I’m searching for the niche tools and methodologies that will provide consistent numbers and that can be automated. I’ve tired of the constant adaptation and modification routine. I’ve learned some important lessons buying strong into the hottest market the Austin area’s seen and then watching it flip to a soft market. So, yes, you’re right. Although I did anticipate some of the lessons, I certainly didn’t act fast enough to lessen their impact. Some street lessons just can’t be avoided for folks as stubborn as I am… :banghead
I’ve been trying to get Ray down here for South by Southwest since the day I met him. We did do the Wizard thing a couple of years ago, which was a blast, but it’s been pretty much CREO get-togethers since then. So, let me know if you put something together and I’m in. Thanks.
I just sent Alcorn an email attempting to lure him down here one more time.
I’ve been promising him some books for the last two weeks and I haven’t even made it to the Post Office yet – we did have ice and snow here , you know? (like your sig quote by the way)
Anyhow, we’ll see if we can’t get the ball rolling a little and see if he wants to come out and play.
Otherwise, I may have to travel to VA sometime this summer.
Talk to you soon,
Hi Tim -
Well, I sent Ray a care package ( a few books and such) trying to cajole him into traveling down our way soon.
Seems that the best chance might be in mid May. How’s that for you? If it meets with your approval, you might do some lobbying too.
Let me know if the bribery has any influence and I’ll try to come up with something as well. Also, I’ll send RA a note.
May’s fine as long as it’s not on a Saturday - too many ballgames - last Saturday we had four between my two boys. As much as I would enjoy finally getting some face time with you and spending time with RA, that’s not a choice I want to make.
Hi Tim -
Actually, Ray is wanting to do another “Wizard” thing this Spring – sometime before the summertime heat gets too hot and affects his thinking (or his comfort level – I’m not sure which).
So, hopefully he will be there for more than a day or two. I have a buddy who recently moved from the area (actually he lived on R Williams street there in big time Buda) and still has his house for sale.
Maybe I should work a deal and rent the thing out to Ray. What do you think?
Personally, I think bribes are almost always useful. Ray is one of those guys that I could talk with for hours and never touch the same subject twice.
There are a lot of changes going on in our world today; a few of those will impact some of us more than others.
Increased volatility in all markets
Thinning profit margins
Increased level of competition from larger, more sophisicated players
More and more regulation in all forms
And that’s just some of the “bigger” ones that Ray and I discuss from time to time.
We’ll get this Austin thing to work. You’ll see.
PS - and no, a choice between family and anything else is really no choice at all. See you.