Wording of an Option Contract - Posted by Kristine-CA

Posted by Stu on May 04, 2003 at 22:14:02:

The beauty of options is in their flexibility. You can write the option for 20 yrs if you like or 5 yrs and renewable every 2 yrs after that. You can also set a fixed price now or have the price go down over time with equity paydowns if the option exercise price is the balance of their mortgage or have the price go up (but less than the appreciation of the market) so you both share in the increasing value of the house over time. A recorded option automatically clouds the title and puts you in that first position. Your owner can sell to someone else but would someone else want to buy at 175K if you have an option to buy at 160K? I wouldnt think so.

That being said, straight options frequently include kickout clauses so the owner can try to sell to someone else and since you dont want that you can either not have one in your contract or include a right of first refusal specifically in the contract if you use a kickout. Your best defense is a recorded straight option over a long period of time (or automatically renewable) and a good negotiation on price and/or terms of the deal so any other potential buyer would lose money trying to buy it once you exercised and bought from them.

hope this helps,


p.s. here’s my ‘im not a lawyer’ disclaimer plus i have 2 different straight option forms if you want to see the language i use. feel free to send me a private email and ill send them along…

Wording of an Option Contract - Posted by Kristine-CA

Posted by Kristine-CA on May 02, 2003 at 19:06:42:

I know this is a legal question, but I need help understanding how to word an option contract. I want a first right to buy (for a set price) a property that is being held for the possible return of the owner from a nursing home. The family is interested in selling but will be holding it a little longer. What is the proper language to tie it up so that I would have first right to buy? Something that I can record that would cloud title if they went around the option. But I don’t want the option to force them to sell before they are ready. So the time frame confuses me. Is it called first right of refusal that I’m looking for?

Sincerely, Kristine

Re:May not work in this case but - Posted by frankca

Posted by frankca on May 05, 2003 at 18:16:36:

you have more control if the property is deeded to you and you give them an option to buy back.