Tie up properties with Option or a Purchase-Sale Agreement?

[Lynn Henley]

I'm trying to tie up a property long enough to either find private money, so I can close myself, or quick resell to an end buyer.

What are the advantages and disadvantages with tieing up properties using either an "Option" or a "Purchase and Sale Agreement". I know you are not actually obligaged to purchase the property, if you use an Option, but do sellers back-track when you present them with an Option?

How long do you try to tie it up with an Option?

If you use a "Purchase and Sale Agreement", how for out do you say you'll close? Do you the typical weisal clauses (property or title inspection, partner approval, etc)?

Thanks,

Lynn (FL)

[Andrew Isaacs]

Good questions Lynn. I'll take them one at a time. My rehab company utilizes both options and purchase agreements. I think of them more as chess pieces. One is not necessarily "better" than the other. It is important to know how they work and what their benefits/drawbacks are, then use them strategically when the circumstances are right.

Sure sellers balk at Options, for a number of reasons. For one, they are a little unusual. Also, typically the seller wants to SELL... not give you a fantastic price and exclusive right to buy it. But, that doesn't mean options will never work. We do them frequently.

Usually the option period is 30 days. Might be longer if there is some circumstance requiring it. We typically don't need that long to figure out what we're going to do with it. I'm more likely to do an option if a seller wants to get an agreement right away, before I can do my due diligence.

We use purchase agreements far more often. The level of "outs" we leave ourselves, again, depends on the circumstances. Institutional sellers (HUD, banks, etc.) are unlikely to do options at all and are hip to the "weasel clauses" you suggested. In my experience, they won't accept that kind of offer. Private sellers are all over the map.

So... to answer all of your questions in two words: It depends.