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pilot76180

Option Consideration

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I'm Curious MC, why is it that when doing a CA vs. subletting, that you don't pay the seller any option consideration? I'm just thinkin here about being a true PRINCIPAL in the agreement. It would seem taht you would need to pay some small consideration, and then you are a true PRINCIPAL, and could then assign your rights for the assignment fee.

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I'm not an attorney, of course, despite my slick ways and shiny suits. That said, you can readily make the argument that some option consideration should be paid to make the option binding and legal. If this is of concern and your comfort zone is such that you feel the need, then by all means slip a token amount into the hands of the homeowner, and duly note it on your agreement.

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I am meeting with our attorney to discuss this next week. I would like to do exactly that and put some wording in our Option to state that we paid consideration of blank amount, and that if the contract is assigned, any assignment fee will also be considered as option consideration. Given the large number of these that we do, and that we are wanting to take this even larger, I want to have everything perfectly in place to prevent problems down the road.

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I am meeting with our attorney to discuss this next week.  I would like to do exactly that and put some wording in our Option to state that we paid consideration of blank amount, and that if the contract is assigned, any assignment fee will also be considered as option consideration.  Given the large number of these that we do, and that we are wanting to take this even larger, I want to have everything perfectly in place to prevent problems down the road.

 

Is this neccessary? - Consideration Deposit...

 

Akin

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Is this neccessary? - Consideration Deposit...

Quit thinking of it as a deposit. A Deposit is something you can get back. When you rent an apartment a Damage Deposit is usually required. At the end of the lease if the apartment is returned in the same condition as at the beginning of the lease, normal wear and tear excluded, your Damage Deposit is refunded to you.

 

Call it Option Money --OR-- Option Consideration, do NOT call it a Deposit. It is NOT refundable. It is NOT a deposit. A tenant/buyer does NOT get Option Consideration back at the end of the lease if they decide against buying the house.

 

Is Option Consideration necessary? No. (Disclaimer: Personal opinion, not a legal one!) Many investors do not give a seller Option Consideration on any type of an Option. Personally, I fill in the blanks as to be paid in the future. I don't even name a figure. If it makes you feel better or eases your mind, then sure give the seller something for Option Consideration $1 or $10. The seller doesn't really care if they receive Option Consideration or not.

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Is this neccessary? - Consideration Deposit...

Quit thinking of it as a deposit. A Deposit is something you can get back. When you rent an apartment a Damage Deposit is usually required. At the end of the lease if the apartment is returned in the same condition as at the beginning of the lease, normal wear and tear excluded, your Damage Deposit is refunded to you.

 

Call it Option Money --OR-- Option Consideration, do NOT call it a Deposit. It is NOT refundable. It is NOT a deposit. A tenant/buyer does NOT get Option Consideration back at the end of the lease if they decide against buying the house.

 

Is Option Consideration necessary? No. (Disclaimer: Personal opinion, not a legal one!) Many investors do not give a seller Option Consideration on any type of an Option. Personally, I fill in the blanks as to be paid in the future. I don't even name a figure. If it makes you feel better or eases your mind, then sure give the seller something for Option Consideration $1 or $10. The seller doesn't really care if they receive Option Consideration or not.

 

What's a deposit????LOL. Ok got it.

 

So when you LO or CA, you obtain a Option Consideration from the TB. Should you as well obtain a Damage Deposit. IS that necessary to obtain when executing a LO or CA?

 

Thanks Kim,

 

Akin

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So when you LO or CA, you obtain a Option Consideration from the TB. Should you as well obtain a Damage Deposit. IS that necessary to obtain when executing a LO or CA?

 

A Cooperative Assignment IS a Lease Option. A Lease Option can be, but is not necessarily a Cooperative Assignment.

 

Yes, you always want to obtain Option Consideration from the tenant/buyer -- upfront prior to their moving in. There are exceptions to that rule, but the exceptions are how you get burned on the Option Money.

 

Damage Deposit? That's a personal choice. I'd say no, because (1) it's refundable, and (2) in Oklahoma {your state may or may not have the same requirement} any "deposit" requires a separate escrow account. I know other investors who'd say yes, that's how you show it's really a lease. Read Michael's contracts. Do you find a blank for damage deposit? I don't.

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I was always giving $1 for my l/o, but after reading about my state I will give $10 to make it leagal.

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I was always giving $1 for my l/o, but after reading about my state I will give $10 to make it leagal.

Tony,

 

Curiosity got the better of me. What did you read that made you change your mind and start giving the seller $10?

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It has been a while but it was on VA's real estate contract (assotion of realtors) about $10 min on a contract for RE...

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