Just starting out - Just use Option Contracts?

Question

Hello BP Community!,

I am new here, and have read a million articles so I don't ask the same old questions every newbie asks, and wanted to say thank you to everyone. There are so many knowledgeable, helpful, and cool people here I really appreciate it! I haven't found this question on here so I figured I would ask away.

I am a new wholesaler and currently lack cash or private money (shocking right) When I find a good deal, and would like to lock up should I just lock it up with an option contract? I figure that if I tell the seller that their home doesn't meet my buying criteria, but I have a network of cash buyers who might be interested in buying their home. I would explain to them that, per my contract, that if I don't find a buyer for 30 or so days that the contract is null & void. My logic is that if I can't find a buyer we just part ways friends since I currently don't have the resources to purchase myself. Any thoughts or suggestions would be greatly appreciated. Thanks!

Rich Harris · Answer

Thanks for your thoughts guys. I appreciate it!

Curt Davis · Answer

Go the option route as opposed to locking up property with no intent to ever close.  Having the weasel clauses only makes what we do seem negative to outsiders.  I like that you will be honest with the person whom you are trying to sell their home.

Shaun Reilly · Answer

I will preface this with I am not doing this but have done some research on it as I want to determine the best contracts to use to tie up properties.

Options seem like a good choice since it gives you the option but not the obligation to buy but commits the seller to sell to you for the specified price during the stated period.  Not that much different than having a full sales contract on it with contingencies other than you don't have to "weasel" out of the deal if you can't move it.

I actually like the idea of going this direction as it seems much cleaner to me.

Zach Schaar · Answer

An option contract dosen't lock up the deal. It gives you the option to buy or assign an end buyer, and the seller to keep marketing it for sale on their own. So, if you analyze the deal and it's a steal, I would slap on a full purchase agreement. If the deal falls through, just make sure you have your addendums on there whether it be inspection periods, subject to financing, whatever may happen that you would not be able to follow through with the deal.

Personally, I would only use an option on a deal I wasn't sure was very good or not. If the risk was higher. That way, if I don't assign an end buyer, I don't tie the property up for no reason. That way your credibility stays good.

Also, even with a PS agreement, you can still get crossed. If it's a steal of a deal, make sure you cloud the title to protect yourself!