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I have done a ton of cash transactions (over 100) either to flip and fix or sometimes assign the contract. Sign a Purchase and Sell agreement, give myself a due diligence period or inspection period.
Sometimes the due diligence period is a week, and sometimes 30 days. Mind you I will deposit escrow with title company and if for any
circumstance I decide I do not want to move forward during my due diligence phase per my contract I can cancel my contract and get my
earnest deposit back.
From the example above, is that not an example of an option?My Limiting Belief
When it comes to options my mind is telling me if a seller would allow me to get an option on the property (that doesnt include a Purchase and Sale Agreement) is not as attractive, tons of work needed done, or is overpriced etc. Also, my mind is telling me that the seller also may not believe I have the capacity to close? Iguess, im confused on how an option gives much benefit to the seller over other potential offers.I know OPTIONS can be used in other ways, but on the acquisition side Im convinced these are very unique situations for them to work.
Can someone give me some real life examples in why a pure Option has worked best as their option to move forward with you?
Mornin’ Jordan,
Sorry for the delay getting back to you. Kim and I are in Spain this month.
Purchase and Sale Agreements, if contingencies are involved, begin life as an Option. Example: I will pay $200,000 to buy your house in 30 days contingent upon me getting financing that’s acceptable to me, and contingent upon an inspection of which I approve. If both “Buyer” and “Seller” sign this contract, because the “Buyer” has the right to cancel the contract if “acceptable” financing is not found and/or a “acceptable” inspection does not result, but the “Seller” cannot cancel the contract, this contract begins life as an Option.
That said, once the contingency period expires, both the Buyer and Seller are locked in equally to the contract.
NOTE: I initially put Buyer and Seller in quotes because initially they were actually Optionor and Optionee.
Here’s your real world example:
Right now Kim and I are working on a deal to buy a rental property in Tampa. I thought it would be a quick, easy closing. Turns out the seller, due to an estate situation, is not on title. To get this deal to closing, Kim and I must first pay to probate the seller’s mom’s estate. Once this is done, Seller will be on deed and be able to sell us her property.
When we first met with Seller, we both signed a Purchase and Sale Agreement. Now that I’ve discovered the estate problem, I’m cancelling the P&S and switching to an Option that will be secured to the property via a mortgage. Instead of a fixed purchase price, the new sale price will need to be determined by a formula. (Agreed to sale price – expenses Kim and I will incur probating her mom’s will.)
I’m switching to a secured Option because the Option will be a 3-year Option because I have no idea how long the probate will take.
Hope this helps.
Bill Cook
770-815-8727Good morning Bill,
No worries about getting back, as I hope you’re enjoying Spain. Also, your real-world example is a deal just like mine as well. I signed a P&S agreement with them but just extended the timeline that is very open to when the probate gets completed. However, my interest in this contract does not exactly hold much weight since they technically don’t own it. I like how the option keeps you better protected throughout the probate process. I’m guessing you did record this option with the county as well?
Thanks for your help!Look forward to hearing more!
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