"flex option agreement"

[William MacBride]

Hi
I just got a little surprise this morning. It turns out my girlfriend and I are already an incorporated real estate business called "Alpha and Omega Real Estate Servives, Inc." She somehow got incorporated without my really being consciously aware of it by paying some company called "The Tax Club" 900 dollars. and they're also gonna help handle her taxes (or something). Anyway that's not really the point of my post.
She bought one of these real estate programs a little while ago put out by a guy named Tim Mai. Included were forms called a Flex Option Agreement. It basically states that seller agrees to let the "buyer" try to sell their house at a higher price to an "end buyer" and pocket the difference. If either the buyer doesn't find an end buyer in that amount of time, or the seller finds their own end buyer, the contract is null and void. Nobody owes anybody anything further.
This kind of seems like your basic low risk sort of arrangement. I just wanted to know if:
1. This document and type of arrangement is fully legal.
2. If it's something that commonly done and fairly easy to arrange.
3. If anybody has anything to say about Tim Mai's program
4. Any other comments you think relevant
Thanks,
Will

p.s. is it better to be incorporated or to be an LLC?

[Marv Jordan]

Originally posted by William Mac Bride:

Hi
I just got a little surprise this morning. It turns out my girlfriend and I are already an incorporated real estate business called "Alpha and Omega Real Estate Servives, Inc." She somehow got incorporated without my really being consciously aware of it by paying some company called "The Tax Club" 900 dollars. and they're also gonna help handle her taxes (or something). Anyway that's not really the point of my post.
She bought one of these real estate programs a little while ago put out by a guy named Tim Mai. Included were forms called a Flex Option Agreement. It basically states that seller agrees to let the "buyer" try to sell their house at a higher price to an "end buyer" and pocket the difference. If either the buyer doesn't find an end buyer in that amount of time, or the seller finds their own end buyer, the contract is null and void. Nobody owes anybody anything further.
This kind of seems like your basic low risk sort of arrangement. I just wanted to know if:
1. This document and type of arrangement is fully legal.
2. If it's something that commonly done and fairly easy to arrange.
3. If anybody has anything to say about Tim Mai's program
4. Any other comments you think relevant
Thanks,
Will

p.s. is it better to be incorporated or to be an LLC?

Hi William,

Sounds like you and your girl need to communicate better and decide together about your goals and commitments.

Whether to incorporate a C or S corp, form an LLC or Ltd partnership, use a land trust, or some other entity form, is not a simple or singular question, and depends on your circumstances, goals, financial and tax situations, your family structure and estate situation, your place of domicile, and the jurisdiction in which you are acquiring property.

Tim Mai is a very creative marketer who has a well trained systems background and a refugee's street smarts. He is also a very generous and socially conscious person who likes to help others.

The "Flex Option" is one of dozens of forms of option agreements that have been used by real estate investors and commodity traders for perhaps 200 years or so. They are perfectly legal and are currently popular in the "quick turnover' wholesale markets.

Sellers who enter into such agreements gain the marketing efforts of another dedicated sales driven marketer, who very often has a pre-existing buyers list, or a large investment buyers network. By the terms of the agreement, sellers have very little risk as they are free to continue their own marketing efforts and their only obligation to the optionor is to sell to them on acceptable pre-agreed terms, and/or to notify them if the seller's own efforts produce a buyer first.

The statutes of frauds make it illegal to offer for sale, or enter into a contract of sale for a property which you don't own. An option agreement, including Mr Mai's forms, give the optionor a legitimate and marketable equitable interest in the property, and the right to sell the property subject to the a priori conditions of the option, which must be exercised and closed on, at or prior to the closing of the subsequent sale. The "Flex Option" goes further than most option agreements, in that it specifically negotiates the right to resell and places the optionee on affirmative notice of the optioning buyer's intent do do so.

These explicit disclosures are a strong affirmative defense to allegations of fraud or misdealing, as they are a concrete part of the written agreement.

By using this form, wholesale investors have the ability to acquire substantial numbers of marketable properties with limited investment and carrying costs. By retaining the right to continue their own marketing efforts sellers are justified in giving the "Flex Option" without taking an option fee, and enhance their positions by having additional marketing exposure for their offering.

In practice, if the terms of the option are well negotiated, and the property is properly priced, one of Tim's students could sell or assign the option very quickly, often in as little as three to five days.

I hope this helps.