Longterm option agreements

1 Reply

We've been working on a deal that involves the acquisition of multiple properties that we are getting option agreements on. The seller does not want to sell any of the properties now to avoid tax damages, which is why we have gone about the option route. Does anyone have experience with longterm option windows? We won't be able to execute the option until the estate takes over, but we need to come to an agreement that reflects market changes in case that isn't for a long time. 

We have toyed with CPI but that wouldn't correct for a downward shift in the market, and are now tentatively thinking the percentage change from the local RMLS reports. It'd be great to hear from anyone that has experience in this area.

I have seen options where the term is up to when the real property passes (probates) to the owners lineal descendants. For price, you could come up with a percentage of appraised values as determined by the average of 2 or 3 appraisers at that time. Appraisers can get expensive, so maybe the average of 3 CMAs or BPOs from local agents? You could say 92% or whatever of that value, maybe? Kind of leaves you in a lurch. I would like a set price if it were me with small escalations over time already mapped out. If FMV has dropped for some reason, just don't exercise your option. Way to think creatively Neal C.!

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