another newbie q... - Posted by TW

Real Estate Investing
1

Posted by John Corey on June 01, 2006 at 05:41:41:

TW,

Go back to the Zick materials. The answers are there.

By recording a notice that you hold an option on the property very little can happen when it comes to a sale. Either the deal would have to go through subject to the option (not likely to happen as the new buyer could lose the place to you) or the buyer/seller will have to settle with you.

Barney’s materials are really solid when it comes to options. It was sad to hear that he passed away last summer.

John Corey

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another newbie q… - Posted by TW

Posted by TW on June 01, 2006 at 24:44:56:

This has rattled my brain for about a year now…

Every time I try to think about it, I get a headache…

I was listening to a Barney Zick CD – he had this great idea about ‘pure’ options (not lease option) – where you record a memo of option (to buy), etc. But you never take control of the property.

This idea was about how you could help someone STAY in their house by helping them with their bills, etc. IN EXCHANGE for an option to buy (say, within 3 or 5 years), where they accept your help ($$$) but agree to forgo all future increases in the house’s value (during the option timeframe). That is, the owner agrees to let you have the option to buy it at its present value, any time within the next 3-5 years.

Here’s the puzzling part – if the plan is to help the owner STAY in the house, how/when do they LEAVE the house?

In other words what’s stopping you (me) from selling their house from under them TWO WEEKS after they sign up.

Conversely, what’s to stop the owner from (merely) staying in the house forever?

See?

I don’t understand how the owner + the option holder can BOTH benefit – and if so, WHEN (exactly)??

During the 3-5 year period, I’m gonna be triying to sell the house, yes? And the owner will be hoping I don’t, right?

I’m confused.

The overall arrangement seems to make sense – but then… it doesn’t!

Help me out here, please.

Thanks!

– TW

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Re: another newbie q… - Posted by Luke Hoppel

Posted by Luke Hoppel on June 01, 2006 at 17:45:06:

Could you just create the option for 3-5 years but verbally agree not to take excercise it for at least 3 years? Or can you write in the contract that you have the exclusive right to buy this house for the next 5 years but will agree not to purchase unless both you and the owner agreed for the first 3 years?
Something along those lines…

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Re: another newbie q… - Posted by Joe Kaiser

Posted by Joe Kaiser on June 01, 2006 at 01:25:46:

Options always have a beginning and ending date. It would be a simple
matter to structure the option to begin in 3 years and end in 5, or
whatever numbers you need.

The benefit to the owner is 3 to 5 years of not having to move.

I talk about this in my foreclosure course as well, offering to bring a
loan current in exchange for the right to buy it at x price in x years,
with the benefit being they can stay, for now.

Lots of things to think about there, and lots of way to get into trouble
if you don’t.

Joe

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Re: another newbie q… - Posted by Skip

Posted by Skip on June 02, 2006 at 06:11:50:

What Nike said above about why this is a bad idea makes perfect sense. I’m curious as to why you think it’s a good idea. Perhaps you protect yourself in ways you won’t go to into here, but I thought I’d ask anyway.

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Yes, I thought of that, but… - Posted by TW

Posted by TW on June 01, 2006 at 02:17:26:

Thanks for that answer, Joe…

But if you do it that way, what’s to stop someone else from buying the house during the ‘blanked out’ years (years 1+2, for instance)?

Can you structure it so NO ONE can buy it during those ‘off-limits’ years? How can that be done?

Also, I assume by, ‘in trouble’ you mean you’d need to be sure there’s full disclosure + plenty of cya doc’s, yes?

– TW