Wholesaling "pretty" homes to retail end buyers using straight options

8 Replies

Hello BP,

I have been looking at a bunch of different strategies for getting started and a few have really caught my attention.

I live on the North side of Houston and one of the REI meetup groups that I attend is hosted by a couple that uses a system in which they are basically getting properties under contract using straight options. I really like the way this method sounds and the fact that I am able to use it on higher end homes and/or homes that just don't have enough equity to offer a normal wholesale offer. I have seen a bunch of other people talking about using lease options and sub-2 to accomplish the same goal but I am not really interested in pre-screening tenant buyers and staying on top of the tenant buyer for the length of the option until the eventual purchase of the property.

This couple teaches to file your option with the courthouse once you have a contract signed so that it "clouds" the title. Talking to a few other local investors, they kind of had a negative perception of that idea because they had seen it where the investor can just walk away but the homeowner is stuck with a clouded title and then ends up going into foreclosure. 

My question is... Say I market to expired leads that are "pretty" homes and can get a seller to agree to a straight option deal, how can I show equitable interest if I am not clouding the title? It was my understanding through that couples system my fee or payment would be able to be listed on the final sales agreement and that it wouldn't really be an issue.

I really like the idea of being able to wholesale back to the retail side and was just wondering if there are any people using straight options to do this currently?

I am a newbie still looking for that first deal due to the fact that I have a hard time shutting off the analytical side of my brain which keeps me scared of getting into something that I don't know enough about. Any advice on which way to go is much appreciated. I just liked this idea because I feel that it fits my personality better than most of what I have seen so far.

Thank you in advance for any help that can be provided. This is truly one of the greatest websites of all time and by far the most valuable real estate website.

-Sean McCrory

@ Sean McCrory

Filing a memorandum of contract is prudent if you are going to spend a lot of time and effort selling or attempting to sell a property.  It will come up in a title search, like you mentioned, but you can also file a release.  So, after you've filed a memorandum you can come back later and file a release.  I personally have never done this but I know it can be done.  I have filed memorandums but I then came through and closed on the the deal or assigned.  

Your never going to know enough.  It sound like you already know the basics so just get out there and learn as you go.  Find a motivated seller and get a property under contract, file a memorandum to protect your interest and then learn how to file a release if and when you have to.  

I live in Spring also.  I'm no guru but I love talking real estate and would be glad to chat about this further if you like.  Also, what meetup have you been going to?  

I go to a couple. One is Flipping Houston Houses with Steve and Peggy Dancer. They are members of BP as well. And there is one called The Woodlands Real Estate Investing Association. There is a new one that just started that I haven't been to yet but plan on attending next week called Real Estate Titans and it is really close to my house. I'm a member with RICH club but it's just so far that i don't make it to many meetings. I have gone to one free event by Lifestyles Unlimited but hey are mostly buy and hold which doesn't fit my strategy just yet. 

I would love to be able to talk about this more. My number is on my profile please feel free to call or text and maybe we can set up a lunch or something 

Assuming you can get a seller to give you an option, cheap enough and at an attractive price (usually not associated with expireds because their house is simply over priced, which usually means no motivation) it's doable.  But, your option fee couldn't be part of their financing, so they'd have to have that in cash, in addition to their other cash requirements. Also, in addition to a simple Option agreement, you need a standardized, detailed purchase agreement similar to your state realtor contract tied to it, so all the ifs, buts and whys are covered.


That is why I am really interested in the "pretty houses" option. I don't have to negotiate a huge price difference since I wont be selling to a investor buyer but to a retail buyer. And expireds would be more likely to be fed up with a realtor and not want to pay the fees associated so I can offer a better alternative to that. And if I file my memorandum of contract and cloud the title it should be able to be included in financing similar to a release of lien type situation. (At least that is how I have understood it from talking to other people - I may be way off though since I have not actually completed a deal this way). I would have to look further into the purchase agreement in addition to the option contract. Not saying either is right or wrong but I havent had anyone else bring that up so maybe state laws vary. Not sure but worth looking into since it has been brought up. Thank you for the response.

Your fee will Not be included in any financing amounts for the buyer, period.  With a simple option contract, there is no agreement that covers the myriad of things that occur prior to a closing.  With an actual purchase agreement detailing the terms,  you have essentially nothing.

I reckon it'd be less effort, and probably more profitable, to just: get your License, and list 'em!...

This is quite a basic question, but is it legal to list a property on the mls even though you technically are not the owner of the house? Or are you guys talking about simply finding retail buyers outside the MLS?

Join the Largest Real Estate Investing Community

Basic membership is free, forever.

By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.