Posted by StevenS(CPA) on July 24, 2007 at 20:32:00:
When to use an option - generally the best time to use an option is when you do not have an exit plan on the deal but are relatively sure you can get the deal done.
A purchase sales agreement is better when you already have your ducks lined up and know how you are going to make the deal work.
Signing a purchase contract may not be a big deal to us who signs them everyday, but it may have a huge effect on a seller who is assuming he has sold his home and on any real estate agents who may be in the deal. They don’t like seeing buyers go back on their agreement even if there is liq. damages included.
An option gives you more freedom to walk away if you can’t do the deal and has less of a psychological impact on the seller if you can’t do the deal.
Plus option money is usually much cheaper than puchase consideration.
But this is just my opinion.
Hope this helps.