Posted by Rick S on May 22, 2008 at 04:01:08:
Thanks David. Where can I get this option form to use?
Rick
Using Options to Wholesale - Posted by Natalie-VA
Posted by Natalie-VA on May 20, 2008 at 06:08:10:
Are any of you using Options as a wholesaling method?
We’ve been rehabbing and wholesaling for over 8 years now. I won’t put anything under contract unless I’m willing to close on it myself. I’m running into quite a few deals where I don’t want the house, but I know it would work for another investor. I have a RE license, but I’m not interested in brokering the deal or having clients.
I would simply like to get a 30 day option and sell that option to another investor.
Is anyone doing this?
Can you give me an example of an Option contract and the basic steps involved?
Do you record it at the courthouse?
Thanks to all who respond.
–Natalie
Re: Using Options to Wholesale - Posted by alvin
Posted by alvin on May 22, 2008 at 11:21:57:
natalie i sent you an email about using a 30 day non exclusive option. it only costs me $1.00 and i let the homeowner know up front that i dont plan on living in the property but i come across other buyers who’d like to take over their payments and responsibilities of maintaining their home and eventually buy it outright from them at their full asking price.
sub2, land trust, NNN then any type of owner financing as the exit and then an equity share to split with the homeowner, investor and tenant.
add me to your list of investors when you find properties with no equity. ill be happy to formally submit a full asking price offer and either pay your fee or split the deal with you.
i do computers full time and i frequently check my email.
Re: Using Options to Wholesale - Posted by IB (NJ)
Posted by IB (NJ) on May 21, 2008 at 22:24:49:
Hi Natalie:
I like Chad’s answer. I use the same clause. However, I have learned that these tend to annoy some attorneys. For some strange reason they tend to take ‘straight options’ more seriously than these clauses and will advise their clients a bit more favorably.
But I would use the clause as opposed to a straight option agreement as the language in the agreement may scare a seller off if she/he doesn’t have an attorney handy who could explain it. Sometimes a simple clause like the one Chad explained will do the trick.
But if you really want to go with the option, do a search for ‘straight options’ (as opposed to 'lease options) in your favorite search engine.
Ib
Re: Using Options to Wholesale - Posted by Chad (MD)
Posted by Chad (MD) on May 20, 2008 at 20:59:57:
Hi Natalie,
If it’s a property you don’t want to get stuck with, you can just put a contingency clause like this in your contract:
This contract is contingent upon contract holder finding a buyer to assign this contract to.
Re: Using Options to Wholesale - Posted by Robert
Posted by Robert on May 27, 2008 at 15:49:06:
What does NNN mean? I don’t understand “equity share split” since buyer is paying asking price how does he
share in the equity?
Thanks,
Robert
Re: Using Options to Wholesale - Posted by alvin
Posted by alvin on May 22, 2008 at 11:30:23:
i forgot to mention that i also tell the homeowner that the non exclusive option is a non binding agreement. its risk free for them to work with me to find a buyer for their home without being tied up exclusively.
i also point out the non exclusive option means that im not tied to them, they’re not tied to me, im not tying up the property, and im not even going to record the option. they’re still free to talk to any other conventional buyer, investor, agent, tenant while im marketing/advertising for my own set of buyers based on my terms.
if they find a buyer before me, great, i withdraw my option they proceed with their conventional sale or lease.
if i find a buyer before them, i exercise my option, proceed with their trust setup, and i split my profits with the homeowner and/or wholesaler
in my option i give the seller’s their full asking price. it allows me to get my foot in the door very easily because i’m not low balling them.
Re: Using Options to Wholesale - Posted by Natalie-VA
Posted by Natalie-VA on May 22, 2008 at 09:37:20:
Thanks for your answer, IB. As I responded to Chad, I’ve never been comfortable using those types of clauses. I mean, how does the conversation with the seller go? “Mr. Seller, I am not really trying to buy your house, I’m just trying to find you a buyer for it.” It just doesn’t make sense to me. My marketing is based on closing quickly with cash. I don’t feel credible telling them I’m really looking for another buyer.
–Natalie
Re: Using Options to Wholesale - Posted by Natalie-VA
Posted by Natalie-VA on May 22, 2008 at 09:34:07:
Thanks Chad. I guess I just have a mental block against using those types of clauses. I feel like when I write someone a contract, I am writing it to purchase the property, not to look for a buyer. I realize there’s nothing wrong with your clause, I guess it’s just not for me. Thanks for the feedback though.
–Natalie
Re: Using Options to Wholesale - Posted by Rick Shepard
Posted by Rick Shepard on May 21, 2008 at 03:46:15:
where could I find the form to use for this type of option?
Thanks,
Rick
Re: Using Options to Wholesale - Posted by alvin
Posted by alvin on May 27, 2008 at 15:54:14:
NNN means triple net lease
this is commonly used in commmercial real estate
we put tenant/buyers in a triple net lease agreement, give them the tax write offs per the IRS code, and when the tenant/buyer qualifies for a loan in a few years, we do an equity share above the full asking price that we gave the seller.
the tenant/buyer gets an equity share of ANY FUTURE appreciation. so this would be a long term triple net lease that they must agree on while taking the tax deductions during the lease.
any other questions?
Re: Using Options to Wholesale - Posted by Natalie-VA
Posted by Natalie-VA on May 22, 2008 at 15:51:31:
Thanks, but I’m working on buying properties with a fair amount of equity, so I need an exclusive option.
–Natalie
Re: Using Options to Wholesale - Posted by IB (NJ)
Posted by IB (NJ) on May 23, 2008 at 05:47:50:
Once again I agree with Chad. I don’t feel my credibility is in jeopardy because I don’t use the clauses on every deal that I do. There are many deals that I do where there is no contigency like this and I’m buying with straight up cash. But on that deal that I don’t want but I know an investor or two who do, I’ll use the clause and tell the homeowner “I have a few partners I want to bring in and see if they like the property. If they do, we move forward, if they don’t, I don’t want to tie you up and waste your time”. They typically don’t have a problem with it.
The way I see it, it’s the same spiel given if I was asking the seller for an option.
Ib
Re: Using Options to Wholesale - Posted by Chad (MD)
Posted by Chad (MD) on May 22, 2008 at 21:43:05:
If it’s a house that you don’t want for yourself, but think you can find a buyer for, there’s no issue as long as you’re honest with the seller. If they’re sufficiently motivated they’ll go for it.
Re: Using Options to Wholesale - Posted by David Barnett
Posted by David Barnett on May 21, 2008 at 19:32:15:
Hi, Actually an option is just that, the option to buy. For Example: If you paid someone $500 for the option of buying their house for $50,000 within 60 days and you didn’t find anyone to assign to, you would just let the option expire. An option is NOT an obligation.
If you are afraid of the option grantor selling the house during your option period, then you can register the option so any potential buyer would become aware of the conflict.
Particularly, this would make it difficult for the owner from refinancing the property for an amount exceeding your option price.
David Barnett
Moncton, NB Can