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Sj900

Seller Option Fee Confusion

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Recently I've been asked quite a bit, who holds the option consideration since it's going to be used as a down payment. Some ask will it be in an escrow account. When I say no, sellers ask so you just hold that money and give it back at closing. They also assume that the part that I give them of my fee. They have to hold for the seller until closing.

 

Another thing sellers say is: How can it be a down payment if it's your fee? Does that mean if the buyer pays 5,000 up front and you take 3,500 of it, only 1,500 can be applied towards purchase.

 

I would like to know how to explain this better to the sellers. I was under the impression that the buyer pays 5k up front, I get 3,500 to go to the mall with (not really) and when it's time to get a mortgage it shows that the buyer made a 5k down payment and everything just works out perfectly. Is there something I'm missing?

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I would like to know how to explain this better to the sellers. I was under the impression that the buyer pays 5k up front, I get 3,500 to go to the mall with (not really) and when it's time to get a mortgage it shows that the buyer made a 5k down payment and everything just works out perfectly. Is there something I'm missing?

The only thing missing is the homeowner's understanding of the process. The answer is in the agreement, specifically the CA Assignment Agreement where it states that the assignment fee is also considered option consideration.

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I have never seen the forms used in Michaels course but one thing I personally would never do is label something as the down payment even in passing I would make sure it is clear that it is nonrefundable option money but it will be allowed as a credit toward the total purchase price in a manner acceptable to the buyer if the option is exercised in a timely manner..And of course the purchase price reflects that. Labeling it down payment may come back to bit you in the rear in some courtroom some day.. And I've been bitten there enough times and would like to avoid more teeth marks.

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I have never seen the forms used in Michaels course but one thing I personally would never do is label something as the down payment even in passing I would make sure it is clear that it is nonrefundable option money but it will be allowed as a credit toward the total purchase price in a manner acceptable to the buyer if the option is exercised in a timely manner..And of course the purchase price reflects that. Labeling it down payment may come back to bit you in the rear in some courtroom some day.. And I've been bitten there enough times and would like to avoid more teeth marks.

You're right, of course. I overlooked the original poster's reference to option consideration and/or the assignment fee as a "down payment". It isn't, and should never be referred to as such.

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