Posted by JoeKaiser on March 03, 2000 at 10:24:25:
How do you figure?
Joe
Do You Need Option Consideration for a L/O to be Legal? - Posted by Frank
Posted by Frank on March 03, 2000 at 09:33:18:
Talked to a seller yesterday who was interested in selling to me on a L/O. The seller did not mention option consideration thus I didn’t bring it up. Question for the experts - do I need to secure the L/O with option consideration in order for the L/O to be legal and binding in 3 years when I buy the property? I know the rule of thumb with owner financing is never to mention interest unless the seller brings it up. Does the same apply in this case? I don’t want to take advantage of the seller but at the same time don’t want to be stupid about it and end up giving money for option consideration when I don’t need to.
Re: Do You Need Option Consideration for a L/O to be Legal? - Posted by Steve-Atl
Posted by Steve-Atl on March 03, 2000 at 12:19:40:
I understand you need some sort of consideration to make the option binding. I usually offer $100, but no more. Of course, I know I can get more from my buyer.
No… - Posted by B.L.Renfrow
Posted by B.L.Renfrow on March 03, 2000 at 11:40:42:
You need “consideration” but that consideration need not be money; as Bert says, your promise to perform, your assuming maintainence responsibilities, etc. all have value, thus that’s the consideration.
As a matter of fact, I was standing right behind Bert in Atlanta while Bill Bronchick was discussing this very topic at his roundtable discussion!
Option consideration should be something you collect from your tenant/buyers, not something you as an investor pay. If you have a seller who insists on something up front, offer prepaid rent instead.
Brian (NY)
Re: Do You Need Option Consideration for a L/O to be Legal? - Posted by Bert G
Posted by Bert G on March 03, 2000 at 10:55:05:
Bill Bronchick talked about this a little at the convention. Basically, an option does need consideration to be binding, but that consideration doesn’t have to be in money, it just needs to have value. In L/O situations, your management of the property has value, thus should be sufficient consideration.
Re: Do You Need Option Consideration for a L/O to be Legal? - Posted by Brian W(IN)
Posted by Brian W(IN) on March 03, 2000 at 09:58:07:
Frank, to answer your question, no you don’t need to give the seller option consideration money if they don’t ask for it. If you are feeling guilty about it, then offer to give the seller a small amount of option consideration money.
Yes, but it need not be money - Posted by William Bronchick
Posted by William Bronchick on March 03, 2000 at 18:31:22:
You need consideration, but money isn’t the only way. I offer to fix up to $500 of repairs on the property per year, which is also part of my sales pitch. This is legally-binding consideration.
Do I actually do the repairs? Heck no! My subtenant does them.