Assignment of option: how to protect my interest? - Posted by B.L. Renfrow

Posted by Brian Renfrow on May 09, 1999 at 01:23:03:

Seller is offering to hold mortgage with small down. I haven’t exercised my option though, since he wants FMV and won’t come down, so I’m planning just to assign it. First classified ad in local Pennysaver started with name of town, 2 bdrm, 1 bath, etc, etc, at the end I put “owner financing”. No responses. None.

Ad I ran last week: OWNER FINANCING, NO BANK QUALIFYING, 2 bdrm, bleah, bleah… Phone’s been ringing off the hook.

Assignment of option: how to protect my interest? - Posted by B.L. Renfrow

Posted by B.L. Renfrow on May 07, 1999 at 19:44:48:

First, let me say as a relative newbie that this board is one of the most valuable resources I’ve come across. I probably spend too much time reading it when I should be out looking for deals!

Here’s the question: I’ve gotten options to purchase on a couple of properties so far. I’m looking to sell the options. Now, maybe I’m spending too much time thinking about all this, but what’s to prevent a potential buyer from looking at the property, then just waiting until my option expires, and going to the seller and making his offer directly, thereby cutting me out of the deal and saving himself my option assignment fee? I discussed this with my attorney, who suggested I draw up and have any potential buyer sign an agreement (prior to showing the property) in which the buyer agrees that if they purchase, lease or take title to the property subsequent to the expiration of my option, they are obligated to pay me a fee of $2000 (or whatever). Well, I tried this, but found that it irritated the potential buyers to such a degree that I stopped doing it.

I’m curious how others handle this. Any comments/suggestions are most welcome.

Get option to option - Posted by hkCA

Posted by hkCA on May 08, 1999 at 11:50:27:

Here are a few points to consider.

  1. If you haven’t sold the house within the option period, maybe it’s not such a hot deal in the first place.

  2. If you feel a property is a potential money-maker but you may have trouble selling it during the option period, get an option to renew the option at the time you get the first option (huh?). Meaning, get a renewal contingency in your original option. Say, for another $500 (or whatever) paid at the end of the first option period, you have the right to renew the option for an extended period of time.

  3. Your attorney’s idea is useless and is worth only the cost of the sheet of paper it’s printed on. If a buyer wanted to go around you and he had signed the agreement not to, he only needs to get a relative or partner to buy the property or he can take title in a corp or trust and you’d be out of luck, most likely.

  4. At the end of the option period, you have the right to buy the property yourself. Have you stipulated in the option agreement the terms of the purchase? If you structured the terms carefully, you may have another 30 days or so to continue to market until you actually have to close on the deal.

Keep plugging.

hkCA

Re: Assignment of option: how to protect my interest? - Posted by Bud Branstetter

Posted by Bud Branstetter on May 08, 1999 at 08:47:30:

You could get the option for a longer time with the seller able to market it also. Is your buyer aware that you only have an option? Are you recording a memorandum of the option? Ash the seller to be out for the afternoon when you show the property.

Re: Assignment of option: how to protect my interest? - Posted by B.L. Renfrow

Posted by B.L. Renfrow on May 07, 1999 at 23:50:24:

Yeah, I’m sure you guys are right. It just got me thinking though…recently let my option expire on one. Marketed the heck out of it, but it needed more work than I wanted to do, and couldn’t find a rehabber - or anyone else - to flip it to around here (contractors & handymen have 2-6 mo waits for even simple jobs and no interest at all in rehabs - it’s a small town). I showed it a lot though, so I was just thinking…probably too much! On to the next deal…I’m working one right now which I advertised for 2 weeks without response, then changed my ad slightly based on something I read on this site, and had more calls then I know what to do with. With any luck will do the assignment this weekend.

Thanks for the input.

Brian

I wouldn’t worry - Posted by Sean

Posted by Sean on May 07, 1999 at 22:17:36:

After all, you might find someone else to market the property to, or you might exercise that option yourself. If the person decides to “wait you out” he may well find that he has just missed the boat.

Re: Get option to option - Posted by Brian Renfrow

Posted by Brian Renfrow on May 09, 1999 at 01:39:55:

(1) Quite right, but it’s a small town and the property has limited attraction to many, but hot to a few, so I’m not ready to give it up quite yet.

(2) Yes…makes perfect sense.

(3) Agreed…if anything, I suppose it’s best to just record a memorandum of option.

(4) Yes; purchase terms are all in my option agreement, plus I stipulated up to 90 days to close, and so far all the sellers have gone along with it, so I guess that does give me plenty of extra time.

Thanks very much for your input. It’s much appreciated.

Brian

Re: Assignment of option: how to protect my interest? - Posted by Carolyn

Posted by Carolyn on May 09, 1999 at 12:57:03:

RE: "On to the next deal…I’m working one right now which I advertised for 2 weeks without response, then changed my ad slightly based on something I read on this site, and had more calls then I know what to do with. With any luck will do the assignment this weekend."
Would you mind sharing both of your ads, indicating which one of the two was the one that received the best response? Thanks for the response in advance! Carolyn

Re: Assignment of option: how to protect my interest? - Posted by Steve Heller

Posted by Steve Heller on May 08, 1999 at 16:17:59:

Brian,

If you wouldn’t mind, let us know the wording of the ad you ran that brought in the calls.

Thanks,

Steve Heller

Re: Assignment of option: how to protect my interest? - Posted by chris

Posted by chris on May 08, 1999 at 02:33:08:

What did you put in your new ad?