Equitable Interest---Options vs. Purchase Agreement - Posted by Tyler

Posted by Bud Branstetter on March 16, 2000 at 24:37:49:

Last option was for 6 months to try and find a buyer. A couple of months I would use a contract. The option was notarized so that if I felt they were going elsewhere I could record directly rather than a memorandum.

Equitable Interest—Options vs. Purchase Agreement - Posted by Tyler

Posted by Tyler on March 15, 2000 at 11:53:01:

Howdy CRE friends! Been too busy to even post since the convention. It was really nice to meet lots of new people, and see some faces for the first time!

I’m in a situation right now with a deal, and I wanted to throw it out for some input.

I’ve got a seller who has a house, worth 165k, who is quite motivated to sell after having the house listed for 6 months, without getting a bite. They even lowered the price to 139k, for the last month of the listing…still no luck.

I should mention that in the last six months, this market has been pretty soft. Many would claim that the winter season here, coupled with Y2k nerves, has been the real reason for the market slowing. I’m not surprised a bit that the seller had no luck during their listing period.

The story is that 9 months ago, the seller bought a new house in town, and has been trying to sell this other home since then. They have now found their “dream” house, and have an accepted offer contingent upon the sale of the home they’re in now, as well as the vacant subject property.


So after my initial meeting with the seller, we concluded that they would sell the subject property for 122k. They only owe about 40k, but need the equity to get into the new home. That in itself is a great deal, because I’m sure I could get 165 for it, with the right terms advertised.

When I got back from the convention, she was even more motivated. She told me that she’d throw in the seperate tax lot next door valued at 25-30k.

So now the listing is expired, and they are ready to strike a deal.

But I’ve got a few hangups.

First of all, they have a Realtor in the picture, who is trying to sell the house they live in now, and who is also the listing agent for the new house they want to buy. This agent is obviously very anxious for something to be done with this subject property, because unless it sells, nothing can be done with his side of the deal. So, naturally he’s fighting to relist the subject property.

The agent calls me (I’ve actually worked with him before—one of the nosy, been in the business 20 years, type) and asks me what I’m going to do with the property, as the seller told him they were talking with me. He says he wants to know if I’m going to do something, otherwise he wants to list it. I sluff him off for the meantime.

So here I am faced with this dilemna. And to top it off, the sellers are actually my sister’s future in-laws. So I really need this deal to be squeeky clean.


My plan was initially to take an option on the property, and market the house at 169 owner finance. I’d do a simultaneous close and sell the note. I would then pocket close to 30k, and keep the extra lot.

Not bad at all.

Then, yesterday, I was reviewing some of Bronchick’s material on options (I haven’t used options up until now), and he said some things that concerned me.

For one, he said that an option does not give you an interest in the property. Without having equitable interest in the property, how would you be able to legally go and market the property, as opposed to just being able to sell the option itself??

Bill also made the comment that getting an option on a property, then marketing it, then doing a double close, would be walking awfully close to the Realtor line. And I agree. ESPECIALLY with this Realtor so deep in the picture.

I can only imagine what he’d do if, after 20 years of holding open houses, he sees me make 55k doing what might have made him 2k. I just really don’t want him creating any problems by seeing what I’m doing, and making a mess for me…especially with future family involved.

So then I thought I might just do a Purchase agreement that is subject to me finding a buyer. Be straight up with them, and tell them that I’m planning on buying it and owner financing it for my buyer, IF I can find one within a reasonable amount of time (say, one month). The problem I see is that this Realtor is going to attempt to be in my business trying to find out if “I’m going to buy it or not”, and might not understand what I’m doing with my “month”.

Again, just worried about him creating a mess.

I suppose, then, my concerns are

  1. which would be the best angle to take
  2. would dealing in an option in this way be legal
  3. how to keep this agent out of the way, without messing things up

Anyone with experience in something similar??

Thanks for any input…

Nate “Tyler”

Re: Equitable Interest—Options vs. Purchase Agreement - Posted by Bud Branstetter

Posted by Bud Branstetter on March 15, 2000 at 15:31:24:

I expect what Bronchick was referring to was the option a leasee has on a L/O deal. It is worded that way so that they do not have equitable title. An appropriate option would allow you to resell, even list it.

With the numbers you mention you could probably buy with a note and sell on a wrap. Only thing bad would be you on the note. But to make money you sometimes have to reach. A true option is usually used for a longer term. The contract to purchase with an extended closing date works better for near term purchases.

Re: Equitable Interest—Options vs. Purchase Agreement - Posted by MDonovan FL

Posted by MDonovan FL on March 15, 2000 at 13:55:09:

The option IS the equitable interest. The equitable interest is the right to sell the property. That’s what the option is purchasing from the seller. Can he sell his property to someone else if he sells you an option? No. Why? Because you hold the equitable interest.

Its perrfectly legal and straight up to tie the property up with an option and then either do a simu-closing or assign your option. There is no “broker” actions in this transaction because the option is in your name. You are not a third party – you are the party.

Howdy neighbor glad to see… - Posted by DanM(OR)

Posted by DanM(OR) on March 15, 2000 at 13:12:40:

you posting again.

I am very interested in the outcome of your post as I am working on a deal just like this.

Can’t you write a purchase offer with a certain amount of earnest money attached that had a 30-day inspection and approval clause in there with a liquidated damages clause in there to to CYA. Just wondering.

Best of luck to you!

Dan Matejsek

How long would your rule of thumb say… - Posted by DanM(OR)

Posted by DanM(OR) on March 15, 2000 at 17:23:11:

to extend the closing. Is it a couple of months and then anything longer than that you’d use an option?



I think your are right, but… - Posted by DanM(OR)

Posted by DanM(OR) on March 15, 2000 at 17:20:37:

would the local realtor’s association give him a hard time is the question?

I think that Bronchick mentions that you are ok, legally, as long as you are acting as the principal in both transactions. If it were a cooperative assignment, like what Claude Diamond promotes, you would be in a grey area that could get you in trouble.

Am I way off here or what?

Dan Matejsek