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Using Options to Purchase Properties
| | Thursday, December 25, 2003 @ 08:00 AM EST
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Contributed by: Scott Rister
Scott Rister Properties
Read more archived articles about Marketing
Sometimes turning a potential deal into one that will make you a lot of money can all be in the way you “close” the deal. What I’m about to reveal to you is one technique I use which is “optioning” withmotivated sellers for truly great deals.
Let me preface this to begin with the fact that the #1aspect motivated sellers are seeking is very simply CONFIDENCE in you. This means that you can do what you can say and say what you can put in writing. However, even some of the most motivated sellers will need to “see the light” in that
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not every situation can or should be a traditional cash-out closing….for right now any way.
With motivated sellers on even truly great deals the way they look on paper, may not necessarily be
acceptable for a number of reasons. Work with me here and look at these following scenarios and I’ll show you how to protect your interests AND get the deals done too:
1) The seller has a price for what seems to be a great deal but you there are some issues of repairs that may be much more than expected and could kill your profit. This may be a foundation repair that could cost as little as $1,500 or as much as $15,000 which is a huge difference. What do you do?
2) You meet a seller who is behind on payments and is willing to deed the house to you, but you’re cash strapped. In order to make up the back payments it just is not financially feasible for you right then. You feel strongly that you can find a quality tenant/buyer to come up with the down payment needed to make up back payments, but its not 100% for sure and you just can’t afford to get stuck with the payments not being covered. Basically, you’ve got a fish on the line but you don’t know if you can land it. What do you do?
3) When you meet this seller it seems like all the
stars have aligned and it’s a no-brainer deal but the seller is requiring all-cash and not budging. You want to either shop the deal around to secure the best financing, or maybe just line up ANY financing. What do you do?
Well, at times in my real estate career I’ve been in all these types of situations and I too asked myself “what am I going to do?”. I didn’t’ want to let the deal get away so I needed to CONTROL the property until I could be absolutely sure the deal would work for me.
Some people may go ahead and commit to it
monetarily and contractually, but then wish they had not and this includes people like myself at times. I learned the hard way in asking myself, “if the absolute worst-case scenario happens on this deal am I prepared legally and financially?”. If the answer is “no” then I don’t do the deal and neither should you is my point.
So, how do you minimize your liability to zero AND
still be able to control thousands of dollars in real
estate on nothing more than your good looks? For
me it’s a one sentence question that I ask that makesall the difference in the world.
“In looking at this deal I’m not sure about a few things but can you give me 30 days (60,90, etc..) to see if I can make this happen?”
That’s the question I ask and has made me thousands of dollars while minimizing my liability to absolutely zero! Your approach may be like mine use to before I started using this powerful OPTION technique which has secured me many, many deals. See, things are not always an either/or scenario.
This technique is called an “option” and means that because you have the “option” but not the obligation to follow through on a deal. So, having an “option” on a property will allow you to further evaluate true profitability or to secure and/or shop around the best financing.
Probably for me these biggest reason I use an “option” on a property is that I want to make sure I have plenty of time to secure the best buyer to wholesale the deal to. Even having the most detailed buyer’s list in the world still at times makes me want to be absolutely sure I can
get it wholesaled quickly. I don’t want to be forced into a buy & hold situation and I always follow through with what I put in writing.
There simply is no magical “option” generic contract because its more about content. Let me show to you the one sentence I use that turns my simple agreement for sale contract into a straight “option” minimizing my liability to zero and controlling the entire deal:
“Seller allows buyer exclusive 30-day (60,90) option to buy property”………THAT’S IT!!! The main consideration within the contract is to make sure that the option sentence doesn’t contradict any other terms.
I don’t talk wit the seller in terms of “option” as I
want them to warm up to the concept first, and then I’ll show them exactly how it looks in writing. Using an “option” just the way I’ve explained it should give you the utmost confidence to make offers on any and all potential deals you come into because your liability is minimized to ZERO!
Now you can also use “options” to Find All The
Motivated Sellers You Can Handle!
Note:
Scott Rister is an author and “real world” investor just like yourself. Scott has designed his courses to help investors get their phone ringing and to better manage motivated sellers. To find out more about how his courses can help you click here. If you have a question or comment about this article, please post them below where it says 'Comments'.
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