The Pure Option

[moneynfast 0]

Please correct me if I am wrong. With a pure option the seller and I agree to a sale price, and the length of the lease. I would then fill out a Residential Lease with Option to Purchase, and fill in all blank lines. I would then market the property for a tennant buyer, and when I get a t/b, I will fill out the Residential Lease Agreement, and the Option to Purchase [/b] Agreement with the amount I want to assigned to the tennant buyer. I hope I got it right if not please correct me. I want to try this on the new home I was trying to purchase on a lease option. If he is open to it I will present this offer to him.

All replies welcome guys, and ladies.

[MichaelC 160]

I'm glad you asked, because what you wrote is not correct. A Pure Option simply gives you the right, but not an obligation, to purchase a property at a set price within an agreed to time frame. For example, moneynfast gives me the option of buying his property for $165K at any time during the next 45 days. If I decide to buy, the deal proceeds like a typical purchase and sale of a residential property. If I decide not to buy, that's fine, also. I lose whatever option consideration I paid you. (By the way, I only paid you $5.00 ).

You are not leasing the property in any way. So, you wouldn't use the Residential Lease with Option to Purchase Agreement. Instead, you would use the Pure Option Agreement.

Now, once that is done, you have a marketing task at hand. If you want a quick profit, (which is what I am assuming), you now need to get the word out that you have this great property at a great price, etc. Try and sell/flip/assign that Pure Option Agreement. How much you get is determined by a number of factors.

First, the terms of the deal. Is the price below market? If so, how much?

Is your local market place a wild and crazy sellers market, where everything is selling at full price in two days? If so, you have a valuable piece of paper in your hand. Pure Options are a good way to make quick, small profits in a housing market where everyone is getting their full price. Agree to a full price Pure Option with a homeowner. Put down a few dollars as option money. Now, just turn around and market that option. Someone will be willing to give you something for it. $1K? $3K? Who knows? But, it is a way to pay full price and still profit in a sellers market.

[NickC 0]

Moneynfast,

 

I just wanted to add one little thing to what Michael said. What you described is referred to as a sandwhich deal. A pure option is what Michael described.

 

You can assign any kind of deal, as long as the proper clause is in your contract, to anyone you market to. If I am not mistaken.

 

Oh, and let us know how it goes.

Just my 2 cents.

Nick

[moneynfast 0]

Heck MichaelC no wonder I did not see the form because they are not in the book, but I do have them on the file you sent, and I read the pure option form. So I don,t get a seller all I would lose will be the 5 bucks. I got it that part is simple. Ok now what form do I use to assigned my pure option to the t/b not guessing on this one please tell.

[moneynfast 0]

My George I think I have it. It is call a Assignment of agreement is that correct guys? If tha is correct MichaelC I am lost on what names to put in the blanks. They are the first line third line, and fourth. I know what to put in for the date, and Option money that part is easy. woo hoo.

 

MichaelR

 

 

PS Also does the t/b get the pure option form that I fill out on the property, just want to get this all cleared up. The wife called just as I was typing this so looks like they are still paying for both of those properties, and I want to give this a shot and hopefully help them out to make it a win win transcation.

[MichaelC 160]

Michael, OK, you have the Pure Option Agreement in hand. And, you have the Assignment of Agreement doc ready to go, too.

The Assignment of Agreement doc is filled out as follows:

1) first line, you are the Assignor;

2) seller is, of course, the seller/homeowner of the property you have done the deal with;

3) third line, the Assignee is the individual you are assigning the Agreement to.

 

After filling out the Assignment of Agreement doc, all parties receive copies of all docs. In other words, three signed copies of the Pure Option Agreement, and three copies of the Assignment Agreement.

[moneynfast 0]

Well I am going to write a pure option contract on the new house. He wants 119,900 the market will carry that, and he said the pre appraiser was 128,000.00. I will see if he will take 119,000.00 instead of 119,900.00, and I will try to get 45 days to market the property. I even told him that I would even split the option considertation with him. Don't know if that was a good idea, but what do I have to lose. Just 10 bucks, Just five more than what MichaelC would offer. I will write the offer in the morning and see what happes. The worse thing could happen is to lose my 10 bucks, and my cost of the ad, and the good thing if I get a tennant buyer I will get 1000 dollars. I am pump and just want to get some paper work in somebody hand, and this will give me my first real contract after reading and talking about realestate for so many years. I will come out learning from this experience atleast I can say I wrote my first offer and I am waking on water wooooooo hooooooo.

 

MichaelR

[mamasanta25 0]

Great work, Michael R. Good luck to you!

[MichaelC 160]

Michael, let me slow you down, just for a moment. It seems you are missing the big picture here. You are not looking for a tenant/buyer with a Pure Option, nor are you going to be collecting option money.

The Pure Option Agreement gives you the right to buy the property at the agreed to price within a certain time period. That's all. It says nothing about tenant/buyers. The money you collect for assigning that document to someone else is an assignment fee. It does not apply toward the purchase of the property in any way. The assignee must purchase that property prior to the expiration of that Pure Option Agreement, or they lose whatever assignment fee they paid to you. So, the question for the assignee, (that's the person buying that Pure Option Agreement from you), is what is that agreement worth to them. The answer depends upon the value of the terms in the agreement.

For example, based on what you're telling us there is about $8K in immediate equity in this property. What this might be worth to another person will be determined by numerous factors.

Now, if you are looking to assign a Lease with Option to Purchase Agreement to a third party, well, that's a different contract and a different approach.

Whichever approach you take just be sure you have it all down correctly.

[NickC 0]

MichaelR,

 

Your post was a little confusing to me, as to what exactly you were trying to do. I hope MichaelC cleared it up for you. An assignment assigns your interest in a deal over to a third party; for a fee called an assignment fee.

 

Now, have you done your due dilligence? It sounded like you were working under the seller's figures (appraisal). If you have done your due dilligence, by all means ignore what I am saying here, but you certainly want to make sure YOU come up with your own figures. Check the comps yourself.

 

Just a thought.

Nick

[moneynfast 0]

Thanks MichaelC, Let me see if I have it now. I am looking for a conventional buyer and not a t/b. If the person who is buying the pure option does not purchase the house by the time the option expires, they will loose there assignment fee. I think I have it now I am trying to assigned the option for a fee, and not looking for a t/b. Also if they purchase the property before the option expired they do not lose the assignment fee, except I get to keep it and they just will be buying the home because they got it before the expiration date on the pure option. I hope made this sound right.

 

Michael

[MichaelC 160]

Let me see if I have it now.  I am looking for a conventional buyer and not a t/b. 

Absotively, posolutely correct!

If the person who is buying the pure option does not purchase the house by the time the option expires, they will loose there assignment fee.

Correct, again.

I think I have it now.  I am trying to assign the option for a fee, and not looking for a t/b.

Three for three, Michael!

Also if they purchase the property before the option expired they do not lose the assignment fee, except I get to keep it and they just will be buying the home because they got it before the expiration date on the pure option. I hope made this sound right.

All in all, you have it, Matey! Just be aware that no matter what the assignee does, the assignment fee is yours to keep. Once you sell your interest in the property, you are out of the loop, and any and all money collected by you, is yours.