Poll for those of you doing CA's

[rbaras 0]

Hello all!

 

I've got a few questions for you folks that do lots of CA's. I want to see if there's a single pattern ... or many patterns. Anyway, I expect the results to be interesting and enlightening ... or at least thought provoking:

 

1) In terms of an assignment fee, what is the Minimum that you will take (and is it a dollar amount or a percentage of the option price)???

2) What is the typical option price of houses that you deal with (and how does it compare to the median in your area)?

3) Are you taking any of your assignment fee in the form of a note and if so, how much are you willing to finance??

4) Are you having any problems (even though you're out of the loop) with assignees who stop paying the seller and have to be evicted? If so, though you're out of the loop, are the sellers upset with you???

5) What state(s) do you invest in??

 

Thanks for sharing,

 

Ronnie

 

PS FYI, I've been going for 5k minimum and willing to finance up to 50% of that ... but I'm thinking that $2500 may be too little ... and not enough motivation for a tenant-buyer to stay.

[Doug Pretorius (ON) 9]

I haven't been pursuing CA's much lately but...

 

1. I've never had to take less than 3%, but I might be willing to go down to 2% if I had to.

2. Anything from $150k-$400k. The median for all homes (condos included) is about $250k, for singles it's $290k.

3. Never done that but it's not a bad idea if I can get more, like 10%, then it would be like investing in mortgages, cash flow without tenants!

4. None of my T/Bs have ever had to be evicted (knock on wood).

5. Ontario, Canada.

[Dan (SoCAl) 0]

1) All of mine have been 3% of the selling price, except one at 2.5%. I would have taken a lot less on the last five properties that didn't go, but I couldn't give them away!

2) $450K - $550K, which is actually high-median now.

3) I will consider it, but none so far.

4) One eviction so far, and the seller had me replace the T/B for him at full fee. Not upset with me at all.

5) Southern California.

 

...but I'm thinking that $2500 may be too little ... and not enough motivation for a tenant-buyer to stay.

 

I had a woman walk after paying $30,000 for the option, and another walk after paying $15,000. If those amounts don't motivate people, $2500 is practically an invitation to move! Depends on your market...

 

Dan

Freedom Creek LLC

[<Steve> 82]

Ronnie-

 

75% of what I do are CAs so...

 

1) 2% to 3% or option consideration that equals 2 to 3 months rent typically. Depends on the property.

 

2) Median home price here is $200K, the range I am currently working is $100K to $350K.

 

3) I don't finance any option considerations. I am in the deal, then out, and on to the next one with CAs. SLOs work best if you are wanting passive monthly income.

 

4) No evictions. Some CA tenant/buyers have decided not to buy and move. The seller calls back and we do it again.

 

5) NC

[MichaelC 160]

Ronnie,

 

1) In my area I find that two to three percent is the acceptable amount of option consideration. I'm fine with that, or using my other rule of thumb, which is option money equal to between three and six months rent. In light of the tightened lending standards that lenders are now imposing, I want to see if I can begin receiving more option money, considering that to buy right now is going to require ten percent down for many borrowers.

Minimum? Don't know that I have a set figure. It depends upon the type of deal, my position in it, the value of the property, my motivation level, etc.

 

2) Median price in my county is around $360K these days. That price and lower works best. But if I get a higher end property I won't walk away. But I'll approach it as a CA or a Consultation. Anyway to get my hand in the deal.

 

3) Yes, I've taken notes on option money before. I prefer cash, but if need be to get the deal done, I'm there. But I'll want at least half the money upfront. That's not unreasonable.

 

4) I've had evictions before, and I've had problem tenants, too. And even though the deal is a CA, the homeowner calls me and I will do what I can to help. It builds goodwill, and will often result in getting the property again from that same owner. The one thing I am careful about is getting involved in any way other than to offer my opinion. I'm careful not to offer legal counseling of any kind.

 

5) I live in FL but I can do a CA or a Consultation anywhere.

[<Steve> 82]

In light of the tightened lending standards that lenders are now imposing, I want to see if I can begin receiving more option money, considering that to buy right now is going to require ten percent down for many borrowers.

That's a good point MC.

This year for the most part, I have been finding T/Bs in 2 to 4 weeks for L/O properties. I know on a few properties I could have received more option consideration. I think I will work to get more option consideration and be a little more patient, even if my marketing time increases to 4 to 6 weeks in placing a T/B. Typically I set a 60 day marketing time anyway.

[rbaras 0]

Though perhaps others would still like to chime in, I want to thank all of you who took the time to reply. As I had hoped, I think the answers were thought provoking. Let's keep up the good work. I learned the hard way that though you can consider financing part of the option consideration ... if you don't get at least 2% upfront ... you'll probably get a tenant buyer with a 'renter' mentality . The kind of person that might choose to be 'evicted' rather than walk on their own.

[rbaras 0]

1) All of mine have been 3% of the selling price, except one at 2.5%. I would have taken a lot less on the last five properties that didn't go, but I couldn't give them away!

 

Dan, you've got me curious. Why couldn't you get rid of the last five???

 

 

2) $450K - $550K, which is actually high-median now.

3) I will consider it, but none so far.

4) One eviction so far, and the seller had me replace the T/B for him at full fee. Not upset with me at all.

5) Southern California.

 

...but I'm thinking that $2500 may be too little ... and not enough motivation for a tenant-buyer to stay.

 

I had a woman walk after paying $30,000 for the option, and another walk after paying $15,000. If those amounts don't motivate people, $2500 is practically an invitation to move! Depends on your market...

 

Dan

Freedom Creek LLC

[Dan (SoCAl) 0]

Dan, you've got me curious. Why couldn't you get rid of the last five???

 

Geez, take your pick! Wrong price. No T/Bs. Flakes in the marketplace. Financially unstable owners. 30,000 homes for sale in my area in any given month, another 30,000 in some stage of foreclosure, less than 5,000 actual sales, short sales in the thousands, and ===> "Take over my payments! No down, no qualifying, move in today!" When those guys don't have any takers, and surprisingly many don't, you know the market has tanked.

 

No matter how tuned in WE might be, the general public is clueless and sometimes you just have to wait for them to wake up and SMELL THE COFFEE.

 

Buyers smell it long before sellers, of course, but they are reluctant to commit money to a market that is rapidly sinking. They are waiting for the "bottom." On the flip side -- I kid you not -- as recently as 60 days ago sellers were telling me prices were *possibly* coming down "somewhere else," and those problems would work themselves out before the end of the year. Holy Head in The Sand, Batman!!!!

 

Having said all that, CAs are still my favorite deal by far. As soon as sellers and buyers are on the same page again -- which I think is starting to happen -- CAs will be front and center.

 

Dan

Freedom Creek LLC