Posted by Jeff Morelock on September 29, 2004 at 12:37:25:
Thanks for the reply - I’ll look for the discussion you mentioned
Options, Subject to & Auctions - Posted by Jeff Morelock
Posted by Jeff Morelock on September 28, 2004 at 12:10:41:
I just finished reading a book that mentions an investor who ties up houses with an option, and then uses an auction company to auction the properties.
Of course if I want to learn the ins and outs of this, I have to pay $5000 for the seminar, (may be a good deal - who knows?) but I thought I’d try here first with my one main question…
How can an investor sign an agreement with an auction company to auction off a house he or she does not own - espicially if he or she only has an option on the house?
I think the owner of the house would have to sign, the agreement with the auction company. If that’s the case, then the owner may cut out the investor and just allow the auction company to sell the house.
Any thoughts?
Re: Options, Subject to & Auctions - Posted by jenny
Posted by jenny on September 29, 2004 at 09:25:26:
If you have an option on a property, you have an interest in the property, and can sell it. Think of it like the stock market. If you buy a $5 option to purchase a share of xyz inc. for a hundred bucks, and the price goes up to $120, you can excercise your option, (buy $120 stock for $100) or sell your $5 option for $15 to an investor who would love to buy xyz fo $115. You purchased an option. Same deal on real estate. If you purchased the option to buy a 100,000 property for 90,000, you can buy the property for 90,000, or sell your option to purchase for up to 10,000. Hoe that wasn’t to confusing.
Re: Options, Subject to & Auctions - Posted by kevin IL
Posted by kevin IL on September 29, 2004 at 09:20:28:
If you have a straight option to purchase a property from the owner, this gives you an equitable interest in the property. You can then enter into an agreement to sell the house via auction.
It’s not much different than a flip. Get it under contract and find the next buyer, assign the contract and close. Except in this case you will be exercising your option upon completion of the auction and then reselling to the high bidder.
But what if the house doesnt sell at auction or the auction price isnt high enough to cover your purchase price? If there was a “reserve” price the property would not sell. However, I think you would still be obligated to the auction company for some of their marketing expenses…all depends on your agreement with them.
Re: Options, Subject to & Auctions - Posted by Jeff Morelock
Posted by Jeff Morelock on September 29, 2004 at 12:35:09:
Wow - no that was not confusing at all - well said & thanks
Re: Options, Subject to & Auctions - Posted by Mike (xcop)
Posted by Mike (xcop) on September 29, 2004 at 10:05:42:
An option is not as strong as a purchase contract with contingencies. In a number of states there is also licensing requirement to deal in options even as principles when there is a pattern of activities.
At the minimum I would have the option include a statement to allow the marketing and resale of the optioned property.
Bill Bronchick, houserookie and Johnboy had a lengthy discussion on this very topic some months ago. Mike