A couple of suggestions. - Posted by Jim Kennedy - Houston, TX
Posted by Jim Kennedy - Houston, TX on January 26, 2002 at 15:57:05:
A couple of suggestions. Do NOT call the upfront money you receive an option “deposit”. Call it non-refundable option “consideration” or option “fee”. Be sure to specify in your contract that the non-refundable option consideration is applied toward the PURCHASE PRICE, and ONLY if the optionee exercises his option. Be extremely careful about the exact wording in the contract. You don’t want anyone to construe based on the contractual language that the upfront money is in any way a deposit. It could be argued that, by their nature, deposits ARE refundable.
BTW, this next paragraph isn’t critical, it’s just my take on nomenclature and jargon. I prefer to use the term “tenant/optionee” vs. “tenant/buyer”. I’m of the opinion that it’s a more accurate characterization of the true nature of that individual’s legal standing. The only time I use the term “tenant/buyer” is during conversations and communications with other investors. Personally, I feel that “tenant/buyer” is a misnomer until such time as the tenant/optionee actually exercises his option. The only other time that I feel the term “tenant/buyer” is technically accurate is in the case of a lease/purchase agreement vs. a lease/option agreement. As is taught by most of the lease/option courses, I use two separate documents (a lease agreement and a separate option agreement) when dealing with the tenant/optionee. In the lease, he’s referred to as the “tenant” and in the option agreement, he’s referred to as the “optionee”.
Hope this helps.
Best of Success!!