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Updated over 14 years ago on . Most recent reply
Option Contract with Subject-to?
Does anyone use an option contract for a subject-to deal? If so, can anyone share an example with one filled out?
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Phil, first, it won't be a "one pager", nothing near it, since you will need to describe the note and deed of trust being taken sub-2, it might look like this;
That promissory note made on the ___day of ____ by______ as borrower payable to CXYZ Bank of ABC, Texas and secured by Deed of Trust of even date, filed in the Office of the Recorder of Deeds for GHB County, Texas in Book 1367 at Page 422, evidencing that specific lien on real property legally described therein and known as 2738 Ninth Street ABC, Texas.
Then you'll need to briefly describe the terms you are to assume; That promissory note having a balance this date of $_________ and accruing interest at the rate eight and one quarter per cent per annum having a required payment in the amount of $522.69 due and payable on the 5th day of each month, commencing payments to be paid by Buyer on the 5th day of December, 2010, and on like date of each succeeding month thereafter until the 5th day of July, 2014 at which time all remaining amounts then outstanding shall become due and payable in full to the holder thereof and credited for the benefit of Buyer hereunder......
With the notary page and signatures required, 5 to 6 pages is more like it, IMO. .
And, with regard to the TREC, your sale price will be the sale price stated in the Option Agreement, less the Option Price, or show the Option Price as a non-refundable earnest money deposit or as a down payment, which will need to be more fully described as being non-refundable and credited.
Now, it sounds like you intend a fairly quick flip here, maybe within 90 or 120 days. That will be your Option Term.
Then to the TREC, you can set the anticipated closing date off 90 or 120 days (check if there is a limit in Texas, just saying match the dates). You'll have events of default in the TREC and inspection periods, by an addendum, you'll need to set these issues aside by paragraph that will not apply and you'll need to explain that the contract is subject to the Option and that any failure to exercise the Option will not consitute default under the sale contract.
OR, maybe a better way would be to simply do a straight Option Contract and state that a TREC is attached (with blaks filled in) and then dated and signed as the operating contract in the event the Option is taken, such contract to be held in escrow until settlement of the Option.
I realize you need to use the TREC and that installment contracts are frowned upon in Texas, which would make life easier for you.
I would think an Option would do and state that it was assignable, sell your Option for a fee and walk. The Option can state the terms to be made on the TREC, and let your buyer enter into the contract with the seller, that will also make the end buyer's financing alot easier! Check with your attorney on these strategies and go with his/her advice.
No such thing as a one pager for a complete understanding being described for any real estate transaction, paper and ink is cheap, mistakes are much more costly! Good luck...