Exclusive Option Assignment

16 Replies

I have lots of leads for wholesaling lease options.

What is the best way to structure this?

Should I use an exclusive option, or I have heard of non-exclusive options where the seller can continue marketing the property on their own.

Or should I use a first right of refusal (not sure what this us but I have read @Brian Gibbons and @Bill Gulley recommend it.

Last month I had a buyer and a seller lined up, but the day before the buyer signed the paperwork, the seller rented it and I missed out on $5k.

LOL, well. what is it you're trying to do? If you just have leads, how do you know what type of transaction or deal you need to do?

A letter of intent to do a lease option? Why not skip the intent and just do the lease option? Fry when the skillet is hot! :)

When i do lease options in California I do the following. I get a letter of intent from the seller, so it goes to attorney or title company, sellers sign lease an seperate option between me my company llc and sellers.

Now have equitable interest. I market the property. Then I find a tenant buyer deposits 3% option plus first and last months rent. That's how I do it.

So if I sign the documents with the seller and it takes me 14 days to find a tenant buyer, when does the seller get paid: is it out of my pocket upfront or when I find the tenant buyer?

Ideally I would like to "tie up" the property for 14-45 days and not have to pay out of my own pocket.

Hope this makes sense. Thanks.

@Brian Gibbons

@Account Closed

In the letter of intent, you spell out that you going to be assigning your deal and you have 45 days. The letter of intent is important to have a "meeting of the minds," in case is a problem with the deal.

It also states that you're acting "agent for" but as "a going business concern."

Funny name! Going business concern!

60 day option. For option to be effective an option price must be paid.

An option term may expire on a scheduled rate over a term. On 60 days, day 2 has 59 day left, on day 30 you have 30 days left. The option may include terms that before the option is actually granted the option price of a stated amount must be paid, say 1% of the purchase price applied to the price.

All you're doing is getting an opportunity to take an option over 60 days, on day 30 if I'm going to actually take the option I pay a reasonable price that gives a defensible equity interest, not an equitable interest amounting to ten bucks.

The agreement can give me access to a property. It states the option, once paid, may be assigned.

I locate my investor, collect 1-5%, cut a check to the owner, assign the option with my release, and usually get out of the way. Give a receipt to the buyer for the assignment fee, inform the closing agent. I may advise somewhat, pointing a seller in the right direction. Usually, I don't need to do anything with a buyer as they invest. Some deals went to homebuyers, I'd help them.

There is no intent letter, if the owner is agreeable I pull out agreements then and there and we do the deal.

If an owner wants to continue to market, I'll just give them a pocket release of the option (usually not, but have). They can sell it or I can mess with it. If I have a buyer then the release comes back to me. The release is given to the title folks under my letter of instruction. Never had an issue as I did much more business with any title company in my area than any owner did. ;)

That's just one way I've done them. That's no money up front. Authorization to enter the property (as applicable/agreed). All I need is to have a contract to justify going on the property, I don't need a $10 equitable interest. When the rubber meets the road they owner gets real money establishing a true equitable interest that I can hold feet to the fire if they change their mind (at least to the extent of getting funds back to the buyer of motivating them to sell).

BTW, options do not "tie up" a property, any property can be sold subject to that option being taken. Getting a lease gives you possession under a leasehold interest.

Work with motivated and agreeable owners, you won't have issues with them performing. :)

What is the appropriate verbiage to specify that the strike price will be subject to the appraisal at the time of purchase?

@Brian Gibbons

The strike price shall be at new appraisal through Wells Fargo or at $400,000, whichever is higher.

Something like that.

See a lawyer.

Thanks @Brian Gibbons

Then I use the assignment fee paperwork for the tenant buyer.

I would handle this by assigning the lease agreement and option and collecting an additional say $5,000 in the assignment fee.

Can the assignment fee to me be part of the tenant buyer's down payment, even though it isn't in the original paperwork with the seller?

"Option Money. Tenant or its assign(s) shall pay to Landlord the a non-refundable amount of _____________________________________ (“Option Money”), which shall be applied first to any assignment fee that Tenant may be entitled to through its assignment of its interest to any 3rd being applied as a credit to the Option Price. The application of the Option Money will be more fully defined in the Option to Purchase Agreement. party assignee, with the balance."

What is the best way to pitch this to the seller when they say that they want the full amount of option money? I'm thinking that if they say they want $5,000, should I just write in $10,000 for my fee, is this correct?

@Brian Gibbons

Hi Ky, it's important to understand the flow the paperwork. This is how I do it.

I demonstrate the benefits to the seller comparing it with selling with an agent, renting it out, and selling it on terms.

Sellers sign a letter of intent which clearly states that I'm going to sell my interest. Sellers signs Lease and an option, and then I market for a tenant buyer because I now have equity interest.

Then I walk the tenant buyer through that wants the property, they pay a check To a title company or an attorney's office. These funds are kept in escrow so that Magdiel can be finished. Usually I get 50% of 3% sewing hundred thousand that would be $3000 in half. On 300,000 it would be $9000 or half about 4500.

As an example, let's use 300,000. 3% of throwing thousands 9000. I would ask for cashiers check made out to the title company or an attorney's office for $4500, and they would sign Ernest my agreement and they would say that they would be willing to enter into a lease an option for $9000 down plus first and last months rent.

Very important, never put money through your business account. Always put the money through title company or an attorney's account. One special reason why is that the tenant buyer is going to give you 3% of the value of the house, you don't want to cancel check in the name of your company, you want it in the name of the title company or the attorney's office.

Thank you again @Brian Gibbons

Brian has invested so much of his time into my business and personal success that I would just like to write a note of thanks on this forum. I spend my free time reading through pages of Brian's posts, and whenever I post a topic he is diligent in his response. If you go back through the thread you will see how beneficial he has been to me.

It is rare nowadays to meet someone who personally invests in other people from the bottom of their heart, but Brian is one of the most self-less people I have met. A teacher at its finest.

I just called Brian at the number listed in his signature and he invested an hour of his time dropping knowledge and wisdom on me. For all of you that are considering membership in BRIAN'S MENTORING PROGRAM, I recommend that you start ASAP. Brian is a great professor and will walk you through it step by step.

A master is someone who knows there field inside and out, someone that has invested 10,000+ hours into their trade. It only makes sense for a less seasoned investor to partner with a master to flatten their learning curve and gain a master's perspective. Our brain possesses mirror neurons, and modeling a master is infinitely effective.

This is not a sale and I am not getting paid to write this. Those that know Brian will say the same. Speaking with Brian has elevated me from kicking the curb to really doing deals. I have been struggling with some of the finer points of wholesaling lease options, there are many details involved.

What Brian understands that a lot of people don't is all the work that needs to go into these deals as far as working with an attorney/title company, an RMLO, and protecting yourself with the new Dodd Frank act. What is the point of doing a deal if you aren't protected and are on the hook to be sued for more than you made. Brian stressed to me the point of protecting not only myself, but also the buyer and seller.

For someone unfamiliar with these topics, I strongly recommend working with someone who knows the finer points of these topics.

Once again thank you to Brian Gibbons for investing his time in my business and thank you to everyone at BiggerPockets for making this possible. The connections you make on here are real and worthwhile. It is possible to get connected nationwide here on this site and I am so thankful to have this site as a resource for my business.

Best regards to the community

Ky Sharp

Prospecting Home Sellers -

There are no ads or links, just training 1 on 1

Originally posted by @Bill Gulley :
60 day option. For option to be effective an option price must be paid.

An option term may expire on a scheduled rate over a term. On 60 days, day 2 has 59 day left, on day 30 you have 30 days left. The option may include terms that before the option is actually granted the option price of a stated amount must be paid, say 1% of the purchase price applied to the price.

All you're doing is getting an opportunity to take an option over 60 days, on day 30 if I'm going to actually take the option I pay a reasonable price that gives a defensible equity interest, not an equitable interest amounting to ten bucks.

The agreement can give me access to a property. It states the option, once paid, may be assigned.

I locate my investor, collect 1-5%, cut a check to the owner, assign the option with my release, and usually get out of the way. Give a receipt to the buyer for the assignment fee, inform the closing agent. I may advise somewhat, pointing a seller in the right direction. Usually, I don't need to do anything with a buyer as they invest. Some deals went to homebuyers, I'd help them.

There is no intent letter, if the owner is agreeable I pull out agreements then and there and we do the deal.

If an owner wants to continue to market, I'll just give them a pocket release of the option (usually not, but have). They can sell it or I can mess with it. If I have a buyer then the release comes back to me. The release is given to the title folks under my letter of instruction. Never had an issue as I did much more business with any title company in my area than any owner did. ;)

This is one of my favorite posts from Bill Gulley.

I use an Option release document. It basically says

Regarding the sale of the above reference property, the Buyer (insert “C” buyer name here) will be responsible for the following fee’s to be paid out of escrow at closing. The fees are for the assignment of negotiated purchase price, negotiated rent and release of the recorded notice of option.
Please add the above fees to the P&S agreement, initial and date by all parties.
Amount payable to (insert “B” investor name or co. name) is (insert negotiated assignment fee / option release fee amount) for property contract assignment, negotiation and option release fee....

@Brian Gibbons , Thanks for the Prospecting Home Sellers video..I'll add it to my rotation...You stuff is invaluable along with you posts...Much of the information on your posts I know but some little tidbit always pops up I wasn't aware of or didn't consider...So with that in mind I always save them to my BP permanent folder on my laptop..

Thanks for What You Do...

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