Price for Option to Buy (by John [CO]) May 21, 2008 2:42 PM|
Price for Option to Buy (by TIM [IN]) May 21, 2008 3:53 PM
Price for Option to Buy (by Jack [FL]) May 21, 2008 7:49 PM
Price for Option to Buy (by knightfork [LA]) May 22, 2008 12:30 AM
Price for Option to Buy (by Steve [MA]) May 22, 2008 3:15 AM
Price for Option to Buy (by Kathi [OH]) May 22, 2008 8:47 AM
Price for Option to Buy (by BillS [CO]) May 22, 2008 8:52 AM
Price for Option to Buy (by Lynda [TX]) May 23, 2008 12:29 PM
Price for Option to Buy (by John [CO]) Posted on: May 21, 2008 2:42 PM
State Specific Question About: COLORADO (CO)
Hi. We have decided to give our tenants an option to buy the house without collecting additional money to go towards the downpayment. We figured it would be easier and safer to advise them to set aside the funds in an account of their own.
However, we still want to offer them an option to buy the house (within 12-18 months) and were curious what people thought was a fair option price to charge.
Selling house for $280,000
We were going to charge 3,000 or 5,000 for the option.
With that money, we don't have to apply it to the purchase price, correct?
I was wondering if anyone had done this and offered at the time of closing to credit half the option or something like that.
Any input would be appreciated.
Colorado John --69.15.xx.xxx
Price for Option to Buy (by TIM [IN]) Posted on: May 21, 2008 3:53 PM
Goes towards the purchase price if excuted. If no purchase happens, your money.
Me, I would charge at least the 5K. Still seems cheap in my book, but whatever deals works for both of you. --71.50.xxx.xx
Price for Option to Buy (by Jack [FL]) Posted on: May 21, 2008 7:49 PM
5k is a lot for someone renting right now. What is to say they don't just leave you after the lease is up and find someone else who is not charging as much? I give a monthly credit, as Jeffrey suggests, after 2 years of being in the place. --65.80.xxx.xxx
Price for Option to Buy (by knightfork [LA]) Posted on: May 22, 2008 12:30 AM
The price of an option does not have to be credited toward the purchase. It should be clearly defined in said option what part,if any, & under what conditions, again if any, is credited towards purchase. --68.230.xxx.xxx
Price for Option to Buy (by Steve [MA]) Posted on: May 22, 2008 3:15 AM
You should set this option agreement up so that you keep the option fee whether they buy the property or not. It should also be clear in the option agreement that this money is NOT going to be applied to the sales price. This is money that they are paying you to have the right to purchase this property in an agreed upon time frame, at an agreed upon price and with any other agreed upon conditions.
I would want a specific time period during which this option could be executed. After the time period expires the sales price & terms would need to be renegotiated.
Make sure that you consult with a lawyer who has experience handling these types of RE transactions.
Good luck with this.
PS Do you care whether this party exercises this option themselves or sells the option to a 3rd party. --72.85.xxx.xx
Price for Option to Buy (by Kathi [OH]) Posted on: May 22, 2008 8:47 AM
Be sure that the lease and the option are separate agreements. If, for any reason, you have to evict these tenants, do NOT refer to the option. It is up to you if you want to credit the option money to the down payment or wheather it is a straight option. You may, at your discretion, include a clause that the purchase price and the rent escallates ___% for each additional year that the option is renewed, with the renewal only going forward if each party agrees in writing. Everything is negotiable. --75.13.xx.xx
Price for Option to Buy (by BillS [CO]) Posted on: May 22, 2008 8:52 AM
As Kathi says everything is negotiable. I would say around CO it is customary to credit the option money against the purchase price. As others said be sure it is non refundable. Use separate documents. Hire an attorney knowledgable in this for your first one (have them review your documents).
Keep us posted. As I said before, I bet you have it back at the end of the option time.
Price for Option to Buy (by Lynda [TX]) Posted on: May 23, 2008 12:29 PM
No, No, NO! The price of the Option is the cost of purchasing the RIGHT to be the sole purchaser of the property for a fixed amt of time. It has NOTHING TO DO WITH ANY RENT CREDIT! You're mixing apples and oranges.
When someone/tenant purchases an Option on a property, they are purchasing basically 2 imp things 1) the right to be the sole purchaser of the property for a 1-2yr period, and 2) to purchase the property for a fixed price that will not go up even tho the property may have apprecited during that time. They are purchasing TIME for themselves, securing the house till they can clean up their credit or get approved for the loan, etc. At this point thay are only purchasing the RIGHTS with the Option--they are not purchasing the property till much later, after all parts of the contract are fulfilled and you are at the closing table.
Awarding the tenant/buyer monies at closing are totally optional to your situation. If your tenant is very good at paying the rent on time and you want to reward that, or not good at paying the rent and you want to give them incentive, if they have agreed in the Option contract to pay full value for your home--in other words--keeping them as the purchaser of choice is good for YOU, then you can write in $100/mo (for every month that the rent of the lease agreement is paid on time) will be credited to them on the PRICE OF THE HOUSE at CLOSING. It is not a rent credit! The tenants may see this as a $100 per month rent credit (because tenants see everything in relation to monthly rent) but you can still use/keep the whole rent for all that time. If they actually get to closing table, then you give them a credit on the PURCHASE PRICE. They can use that money toward the DN payment to the bank that is giving them the loan, or towards their portion of the closing costs, whatever. --140.140.xx.x