It gave me time (and clarity) to sell for the most money, sometimes enhance value.

If you take some of that money and invest in a degree ($50K at a state school, including room and board) or a technical certificate (some are only a few thousand and take less than a year), you're earning potential will be significantly enhanced.

That is $600 more per year or four years before you'd be paying more to exercise that option and it would not be worth it.

The reason is that I would still like to exercise my 1st home buyer benefit (3.5% FHA) but I don't want to miss out on a partnership with him.

Oh, and be sure to get a profile picture up, it enhances your credibility on the forums.

With your background in finance you can start to sort out your comfort and enhance your criteria there.  

If so, what exit strategy would you exercise on this deal?

If they dont exercise the option in a couple of years you have made more money.   

The goal:  Not to be surprised by the bank/mortgage broker when you exercise your plan.  

Options spell out the the consideration given to the seller (for example $500) for the option to buy for a set price, and the time frame in which you must exercise the option.