If I put a House under a Straight Option contract, is there a minimum amount of money that is required in Texas to put down as ernest/option money or can I just do the option without putting down any money? Do I normally receive this money back if I am unable to find a buyer for the owner?
Thanks for any information that you can provide.
There is no law that says how much money needs to be put up as earnest money. You do need some consideration for any legal contract. I have used ten dollars myself several times on contracts where i was buying the property. Must Realtors will ask for $500 or so. What ever amount you put up is subject to loss if you can not perform and get a buyer. If the contract is subject to new financing or selling another property or even subject to finding a third party buyer you would be able to keep the earnest money. This is also subject to the seller approval and court opinion if it goes that far. Under a straight option agreement where you pay cash to the seller for an option period, the seller keeps the option money as payment for letting you try to sell it. i would just use an earnest money agreement that will do the same thing. If you can get the seller to agree to let you resell the property and write it in the agreement then you have a free option. Start small on the amoint and do not give more without getting something else in return like a longer time to close
Hope i have helped a little. Contact me if may help more.
Thank you,
Ted P. Stokely Jr
11505 Sw Oaks
Austin, Texas 78737
512-301-9171 home
512-587-6177 mobile
Hi -
As Ted says, the amount of the consideration is up to you (and the other party).
It doesn’t even have to be cash – I have used stocks, bonds, mortgages (on other properties) as well as services ( I agree to build a pool, construct a guest house, etc) or products (new tractors worked particularly well in farm country).
Now, you may have noticed that in some of these deals the consideration is probably staying behind whether or not the option actually gets exercised.
The point is to structure a transaction that makes sense for all parties concerned. And for that to happen – in most cases – you’ll also have to gain their trust. It can be hard to do that with a dollar.
I’ve done it (and so have others here) but I have to tell you that the most profitable deals I’ve ever done all contained some elements of real risk (to me). My job is to properly account for the risk, work to reduce it to acceptable amounts, and CLOSE THE DEAL.
Make very sure you get that last point. All the dreams in the world won’t feed your family if you can’t get people to believe that you will do what you say – every time. And they don’t really care if it worked out the way you planned or not. They just want what you promised.
Options are extremely powerful tools but they aren’t for everyone or for every deal.
Learn to use them wisely and you will do well. Pretend they are an easy way to wealth and you’re liable to end up terribly disappointed (and broke).
Take care,
Eric C
I am new at all of this and I appreciate any in-put that I can receive.
Hi Everyone!
I am trying to understand, if a seller signs an option to buy agreement, is it less risky than than having to sign a contract for purchase? If so, where can I get one?
What is an earnest money agreement?
Can I sell an option to an investor for the same fee as if I were to assign or flip a contract to him? How would I set that up?
Let me get this straight, if I can’t find a buyer, I lose my earnest money just like a purchase of contract? Don’t I risk that investor goes to him and offers a better deal?
One last question: I heard even if I wholesale a contract to someone, lenders are becoming picky and won’t lend on this type of transaction: something about a chain of title?
Please help. I’m new!
Natalia
I think options are the easiest and simplest way to “buy” a property with the least amount of risk. Here’s how I structure it:
We have a 2 page contract, it’s a simple and direct contract that easily states that I’m going to buy the house at x price, that the home comes as is (or if they are fixing something then put that in there) and that I have no obligation to purchase unless I choose to. We have an agreement on the length of time I have the option and I usually ask for 30 days.
I give them a $10 deposit, sometimes more but never more than $100. This is non-refundable and who cares, it’s $10.
I advertise to find a buyer and of course call my buyers list. (If you aren’t making a buyers list you really should!!)
Once I find a buyer then I let the seller know and I stay on top of the lending, appraisal, inspection, hazard insurance and all of that to make sure the deal closes on time!!
You do need to know that on some loans you will have to be the owner of the property for a certain amount of time, but not all types of loans require that. I recently optioned a house (closing on Monday) where I found a buyer the day after getting the option. The mortgage company the buyers went through did not require “seasoning” as it is called, so there have been no problems. The company is Blue Source in case you want to give them a try.
There are a lot of investors out there doing things the traditional way, but I do everything non-traditional and I make a lot more money!!
acqinv,
Is Blue Source a lender finding service? How do I find them?
Thank you, Janis