0 6
M A R E I
|
G E T T I N G
S T A R T E D
The most powerful document in real estate investing is the option agreement. Sadly, the least used and most misunderstood document in real estate also happens to be the option agreement. Why don’t more folks know how to effectively use options to control property? Probably because there are so few investors who have experience using options.
Me Being a Nimrod B Y
B I L L
C O O K
I hate being an idiot, but when you screw up like I just did, it qualifies me to be the biggest nimrod in the land! The most powerful document in real estate investing is the option agreement. Sadly, the least used and most misunderstood document in real estate also happens to be the option agreement. Why don’t more folks know how to effectively use options to control property? Probably because there are so few investors who have experience using options. Most folks have heard of Lease Options, but what about Purchase Options, Performance Options and First Right of Refusal Options, to name but a few?
An option is a right, but it’s not an obligation. Let me explain: If you’re selling your house and we sign a Purchase and Sale contract, I’m contractually obligated to buy your property and you’re contractually obligated to sell me your property. If either one of us refuses to perform, there’s a fair chance attorneys may get hired – cha-ching! On the other hand, if I buy a Purchase Option from you, it gives me the right to buy your property for the agreed-to price and terms…but you can’t force me to perform! However, you ARE obligated to sell me your property for the agreed-to price and terms, if I choose to exercise my option.
Think about it: Doesn’t using an Option to control a property sound a whole lot safer than using a Purchase and Sale contract? Let’s get back to me being a nimrod. In 2010, Kim and I bought a threebedroom, two-bath home on Hamilton Crossing in Cartersville, Georgia for $2,100. The home needed a huge rehab. We sold it a few weeks later for about $18,000 and gave owner financing with monthly payments of $375 per month. The buyer was an experienced contractor who planned to rehab and then move into the home. After the new owner finished the rehab, the home’s FMV (fair market value)
