Hey, it’s time for some more Reader Mail! This one comes from the little survey thingy in the sidebar of this here blog…
“My biggest real estate investing question *right now* is why would an investor use a purchase contract when an option contract doesn’t have the same requirements of us as investors? Is this usually a case of getting a contract if it’s worth it, assuming they don’t want to sign an option contract?”
Tom, Tampa Bay FL
Great question, and one I’ve actually heard a number of times over the years. So here’s a video with my perspective on this…
Hey, hope that helped shed some light on it for ya, Tom!
Additional Resources I Mentioned…
- Real Estate Purchase Contract…Undressed (Free Download, Plus Video) »
- The Real Estate Option Contract…Undressed (Plus Free Download) »
- The Non-Exclusive, “Flexible” Real Estate Option, Demystified »
What’s In a Viable Real Estate Option?
One part I left out of the video above is that there are some basic requirements that must be present to make a real estate contract valid:
- Mutual Agreement – Basically you need a “meeting of the minds” on what you want to do and how.
- In Writing – While verbal contracts might be legal, they’re rarely enforceable. So put it in writing.
- Identify the Parties – You need to clearly identify who the seller/optionor and buyer/optionee are…by name.
- Identify the Property – Many people use the legal description, but this is overkill in my opinion. I just put the full street address and that’s just fine.
- Purchase Price – The contract must state the purchase price of the property, either specifically (e.g., $40,000) or a reasonably ascertainable figure (e.g., “appraised value as determined by XYZ Appraisal Company”).
- Consideration – A contract must have consideration to be enforceable. this is (technically speaking) the benefit, interest or value that induces a promise; it is the glue that binds a contract. In an option, think of it as a fee (not a down payment) the potential buyer pays in return for the privilege of having a binding option to purchase. The consideration amount really isn’t all that important, but rather whether there is consideration at all.
- Signatures – A contract must be signed by all parties to be enforceable. (Duh, right?)
So what are your thoughts? Any other insights to offer or additional questions? Post ’em in the comments below!
Thanks for tuning in…