Common Approaches to Option Fees and Earnest Money

[Tony Castronovo]

What is the norm with regard to option fees for feasibility and earnest money related to MF apartment deals? 

Regarding option fee, I think I got lucky on my last deal at $300 for 30 days.  The current deal I am working has an agent pushing for much higher for much fewer days.

I have heard that in a lot of MF deals that earnest money goes hard right away....or very soon.  True?

I realize every deal is different and all things are negotiable.  Just trying to learn more of what the "typical" scenarios look like.

[Michael Le]

There is really no option fee, like in residential, but with earnest money going hard Day 1 it's kind of the expensive version of the same thing. I'm only speaking of the 50+ unit deals but in most of the primary markets around Texas hard money Day 1 is a must to be competitive. In secondary markets it is common now too because people are chasing yields out there now too but you can possibly get away without it. Depending on the market, sometimes it can be up to 2-3% of the purchase, like in DFW. Obviously you will want to do your due diligence to make sure you will be extremely likely to close. Not all of your earnest money has to go hard and not all of it has to go hard Day 1. How you structure that depends on you, depends on the deal, etc.