Big Houses! - Posted by Lonnie Turner

Posted by CarolFL on May 23, 1999 at 10:00:13:

“for $10 and other good and valuable consideration…”

We have had a lot of threads on consideration vs down payment. Consideration does not have to be $$.

I remember Bronchick talking about giving the seller a contract which allows him to “buy out” your option cheaply (say $1000), if another buyer is found before you do. For example, if you have a contract to buy a property at $50k for 6 months and the guy gets another contract offer within that time at $55k, he gives you the grand, the option is null and void, and he still makes out better. It’s cheap insurance for the seller.

Big Houses! - Posted by Lonnie Turner

Posted by Lonnie Turner on May 20, 1999 at 20:46:56:

I have been getting calls from ellers of big expensive houses. The problem is that I do not know what to do with these houses. I cannot flip them to a investor because investors usually rehabs smaller houses(the best market).
I donot want to doa L/O because tenant/buyers for these houses are usuall far & few. So anny suggestion on what to do with these house. maybe I can flip them to Joe Kaiser.
Thank in advance.

Lonnie Turner

TRY THIS APPROACH - Posted by Karl Grube

Posted by Karl Grube on May 21, 1999 at 10:34:04:

Employ a remodeling carpenter to divide the house into a two or three family home. Have this carpenter cost out the changes. Apply to the local zoning board of control for a variance to convert this house to a 2-3 family. If granted, your per unit rental ownership costs will come into perspective. USE an option to purchase contract at a discounted cash price with the right to make improvements to the house as your consideration. Convert the house; obtain a fresh appraisal and mortgage; close with the owner; and become a contented landlord for 30 months before you sell to an investor. If you really want to maxmize your investment, condo the house using a zero lot line clause, making the renters the new mortgage owners!

Re: Big Houses! - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 20, 1999 at 20:57:29:

I’m not so sure a L/O is out of line. But, the least you could do is a straight option (try for at least a 6 month term), no option consideration (or the min for your state), a low contract price, and market like a madman. Let them know they can still sell it before you and you’ll tear-up your contract. If they list with a realtor, make sure you are excluded from the listing agreement. Why no option consideration? Ask them how much a realtor pays them to list their property (exclusively, I might add).

My take-


Jeez… - Posted by hkCA

Posted by hkCA on May 21, 1999 at 12:50:54:

Redline is right. Cost prohibitive, time consuming, and most of all, very unlikely to happen. Ever try to get a zoning change in an R1 neighborhood? Good luck. There are better ways to spend your time and money.

Please re-read JP’s post about giving bad advice.


uhhh … - Posted by Redline

Posted by Redline on May 21, 1999 at 12:15:02:

If you’ve done this type of thing - great. It just seems to me this would be totally cost prohibitive and time consuming. Even if you could afford it and it could be done, the time it would take in most areas to get it approved - and get the work done would make it impossible.

The only advice I have to larger properties is to maybe take a look at Ron LeGrand’s material. He seems to like expensive properties.


Careful! - Posted by hkCA

Posted by hkCA on May 21, 1999 at 12:42:40:


I’m a bit confused as to your advice. How can you get an option without putting up an option consideration? Without consideration, I don’t believe the contract is legally binding.

Next, the fact that you are attempting to find a buyer for the seller without actually having at least a legally binding interest in the property could be construed as acting as a real estate agent without a license.

If I’m wrong about either of these points, I’d like to hear from the legal experts.



Posted by Karl Grube on May 21, 1999 at 18:15:43:

There are always different solutions to the same problem. Perhaps the buyer considers a Bed & Breakfast approach to income and market value! Maybe a carpenter knows more about “big houses” than part time investors. If the government, zoning board, wants the project, a variance will be granted … that changes all the dynamics of value!

Re: Careful! - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 21, 1999 at 13:07:16:


Option consideration: You’re right, state’s laws vary. That’s why I wrote “or the min for your state”.

Acting as agent: The option is a legally binding interest with you as the primary.


Re: Careful! - Posted by hkCA

Posted by hkCA on May 21, 1999 at 13:36:00:


I agree that the option is a legally binding interest in the property. My point was that without consideration you have no legal option. Therefore, no legally binding interest.

I would be interested to know of any state that would allow an option contract to be legally binding without some sort of consideration. That would put a whole new spin on doing deals. If anyone knows of such, please respond.


Re: Yes - Posted by Stacy (AZ)

Posted by Stacy (AZ) on May 21, 1999 at 14:26:05:

Absolutely, if you are concerned about your option holding up in court, you should pay at least the minimum amount your state requires.