The Real Estate Option Contract…Undressed (Plus Free Download)
By | Category: Featured, Free REI Resources, Free Real Estate Investing Forms
Ok, so if you heard my recent interview with Andy Proper about his Virtual Bird Dog Blueprint, then you may recall I promised I’d share my personal real estate option agreement with anyone who’d like to see and use it.
Then I decided to do one better and make a video about it, kind of running through the form itself, what different parts mean and how to fill it out.
Then it turned into two videos. A combined factor of me being a bit too wordy and YouTube only allowing videos of up to 10 minutes.
I remember how intimidating real estate forms can be, especially early in your REI career. There’s nothing all that hard about the option agreement, but I know a tutorial like this would have been a tremendous help to me earlier on.
So here’s the deal…
If you want to download and use two of my personal Real Estate Option Contracts I use in my own real estate investing business, please feel free. Just right-click on the links below and choose “Save Targe As…” or “Save Link As…” (depending on whether you use FF or IE as your browser…and I don’t know what the heck it is for Mac users…sorry.)
Download 2 Free Real Estate Option Contracts…
Disclaimer: I’m not an attorney and am not attempting to give legal advice in any way. Please use this form at your own risk. By downloading it you agree to hold this site and it’s owners strictly harmless from liability due to your use of these documents. Also you should consult your own legal counsel and real estate professional(s) before taking any action or inaction based on these documents or the videos below. By downloading these forms and/or watching these videos you agree 100% with these terms.
- Real Estate Option Contract #1 -- “The Simple 1-Pager”
- Real Estate Option Contract #2 -- “The Still-Pretty-Simple-But-Slightly-Fluffier One”
Watch the Real Estate Option Contract Tutorial…
And here’s part 1 and part 2 of me sharing a few tips and pointers about using Real Estate Options in your real estate investing endeavors, as well as a walk-through of the first (1-pager) contract.
Hope you enjoy — and hey, I’m considering doing more like this and giving more forms away. But I don’t want to do it if nobody really cares. It does take some time, after all.
So please chime in with a comment about whether or not you found this useful and how much or little you’d be interested in more of the same in the future.
Real Estate Option Contract Undressed -- PART 1
Real Estate Option Contract Undressed -- Part 2
Please comment below!
Technorati Tags: real estate option contract, real estate investing, free real estate forms, real estate option agreement
Popularity: 72% [?]










72 Comment(s)
By Peggy (4 comments) | Reply
Love this idea. A gal can’t have too many forms! Keep ‘em coming…
By Mark (7 comments) | Reply
This is great JP! Please do more of these videos/forms. I’m a newbie and this information is very helpful. Thank you!
By Daniel (2 comments) | Reply
That’s great thanks for doing that in more would be good as well. Not sure why but my doc scrambles with letters and dots and things all over the place. If you have a gmail account you can go to free google docs and export it as a PDF and it will be more universal and also professional and printable etc. It’s really easy at google documents. By Thanks for the option contract explaination. I need some learning for Australia but i guess it’s a similar concept America!
By Scott Taylor (4 comments) | Reply
Nice one JP. I’ve been using 30 and 45 day options to flip properties for the last 6 months. It works like a charm and is much easier than doing a double close. In fact, we’ll have to go over it sometime. It’s a great ‘low risk’ strategy…
Cheers,
taylor
By Ryan (3 comments) | Reply
I loved this Idea JP! you Rock! the Tutorial is awesome!
By Amaru (1 comments) | Reply
What do you know about FLex Options?
By Terry (2 comments) | Reply
Thanks JP! Would you be willing to roleplay and show us how you speak to sellers and answer their objections?
By jim (7 comments) | Reply
Just what I was looking for. Google is your friend JP, I may just stick around this site for a while.
By JP Moses (111 comments) | Reply
@jim – Wonderful, Jim! Glad you stumbled upon me! And even more glad I could hook you up with an option agreement!
…jp
By gary (7 comments) | Reply
Very Good , this IS the basics of wholesaling a house and as a beginner ( about to close my 1st deal ! yippie ) this is exactly how i did it and , i really hope you all out there use this info to get into or grow your business . and I can tell you this type of info isn’t out there for free like this is everywhere you go , my hat is off to the folks at REI tips for being straight up and letting you peek into what they do .,,, good job guys.
By Curtis (1 comments) | Reply
I appreciate you sharing this valuable information with all of us. Especially the newer investors. I found the contract easy to understand, but the video made it even easier. Please keep up the good work and thank you .
By Tim Cronin (4 comments) | Reply
Just wanted to know how to get option consideration to optioner if doing these deals cross country I.E. virtually. How do I get it back if deal doesn’t go thru? Will the money be applied as earnest money when switching from option to purch n sales agreement, or do I assign the option itself?Please let me know. Thanx.
By JP Moses (111 comments) | Reply
@Tim Cronin -
“Just wanted to know how to get option consideration to optioner if doing these deals cross country I.E. virtually…”
You could always wire it or FedEx it. Heck you could even Paypal it!
“…How do I get it back if deal doesn’t go thru?”
When you put down option consideration, you’re typically not planning on getting it back. It’s a FEE you’re paying in return for being granted your exclusive option on the property for a designated time frame. But if you have some short term stipulations (like contractor inspection, etc.) I suppose you could make your option consideration refundable if those contingencies aren’t met. You’d either have to trust the seller to return it, or have your consideration held in escrow by a closing attorney and only released upon terms of the agreement.
“Will the money be applied as earnest money when switching from option to purch n sales agreement, or do I assign the option itself? Please let me know. Thanx.”
Option consideration is separate from ernest money in every case I’ve seen. I can’t speak to all situations, but I would say it’s normal for them to be separate and distinct from each other. And yes, you can assign the option itself.
Great questions!
By Dean (1 comments) | Reply
J P,
I’v just down loaded the forms and its always good to have different ones to use.The videos are a great help,really great,its like looking over you shoulder or being right there with ya.How can I save them to my hard drive and attach them to the forms?
Thanks Again,
Dean
By JP Moses (111 comments) | Reply
@Dean – Dean, I’m so glad you like them. Thanks for the feedback.
You can download and save YouTube videos using a service at http://www.keepvid.com. You’ll also need to download a free .FLV viewer to be able to watch them. And don’t forget to add “.flv” to the end of the file extension after you download it.
Technically you’re not supposed to be able to download YouTube videos. I just shared one of my little secrets with you.
…jp
By Swarup (1 comments) | Reply
Wow. Thanks very much jp. It’s awesome to see someone explain this stuff. I needed this! …and more of this kind of information.
By Dub (2 comments) | Reply
Great Video Tutorial JP! Very Informative and Easy To Grasp. This is the Tpye of Information I Love. Please Continue Making These Type Of Video Tutorials… With Relevant and Useful Information. Outstanding Job!
By Rachel (3 comments) | Reply
I was listening to your first video on viddler. By the way,
> it was great so is your entire website.
>
> My question about the option contract since you mentioned about
> assigning. Wouldn’t I need another contract to assign? I live in the
> state of Virginia. Would this work in VA?
By JP Moses (111 comments) | Reply
@Rachel – A keen observation, Rachel.
Yes, you’d need an assignment agreement in order to assign your option contract.
And you can get one free right here: http://reitips.com/real-estate-assignment-contract
…jp
By Paul (3 comments) | Reply
Hi thanks for the tutorials it is like having the ob1 of contracts in your ear
By Karl (6 comments) | Reply
JP, dissecting the purchase and sales agreement, the option contract, and the assignment contract were excellent. You are an excellent teacher, very clear and concise. Thank you.
Question: could the option agreement be revised slightly to tie down a contract on other personal properties such as boats, planes, or jewelry?
From JP: Great question. The answer is…I have no earthly idea.
Sorry, but I’m blank on that one.
Thanks for commenting though!
…jp
By Karl (6 comments) | Reply
So, JP, if you were beginning to learn wholesaling, would the combination of the option contract and the assignment contract be all needed to wholesale a property? Thanks.
You could definitely do it that way, Karl!
…jp
By Karl (6 comments) | Reply
Hey JP, one more related question. This is a tax related question: Could you deduct $100 from a self directed Roth IRA to put an option on a home and then assign the property and take the profits and keep it in your ROTH IRA? (turn $100 into $10,000 in a Roth and the $10,000 is now tax free upon withdrawal at 59 1/2 yrs of age?)
From JP: Karl, that’s a great question. And I have absolutely no idea.
I’ve never dealt with the investing from your Roth IRA stuff. Anyone else out there that has wanna chime in?
By Gionki (1 comments) | Reply
Jp- As a Wholesaler,
1. How where are your top 3 ways you are marketing to investors your wholesaling service?
2. How are you keep your investor list clean?
3. Ever wholesaled a house from the MLS?
By john (4 comments) | Reply
Have would you word a secondary offer cancellation and let the seller still market the property ?
Thanks
By Branson Real Estate (5 comments) | Reply
Seems like these are pretty solid contracts. I’m knee-deep in the real estate investing game myself. So, it’s nice to see like-minded people sharing useful resources.
Thanks!
By Arlen (3 comments) | Reply
This is excellent.
By Arlen (3 comments) | Reply
Watched your Option Agreement video. Well done. Just one question. Do you assign the option agreement when wholesaling, or when you have a buyer do you go ahead with the Sales Agreement and assign that?
By Billy (1 comments) | Reply
I have been trying to get started in wholesaling/assigning/flipping properties (whatever you want to call it). It sounds like a great way to get into investing in real estate w/o any cash/credit or job. But a Realtor I’ve spoken to stated that you still must have to come with cash in order to get a house under contract. The lender (bank or mortgage company, etc) wants to see a POF (Proof of Funds) letter. You just can’t tie up a property and put it under contract and assign it over to someone else unless you come with cash at the table. You must obtain funding in order to put a property under contract. Please advise. How do I get started with no job and no money? Thank You
By Diane Boerstler (2 comments) | Reply
Thank you so, so, so much for the free videos and contracts that you have provided on this website…they are SUPER helpful to a lay person like myself trying to get started and sort everything out…may all good things come to you now!
By Diane Boerstler (2 comments) | Reply
Thank you so so so much for explaining this process and including free forms…your willingness to give knowledge where others are taking without giving is truly amazing…
By JD (1 comments) | Reply
Great video, and info. Q, is there a way to use an Option on an REO? Thanks.
By Arlen (3 comments) | Reply
JP,
Lookin’ for more info. When you have an option on a property, and want to exercise that option, do you do that by then executing a Sales Agreement?
By Brian Dickerson (1 comments) | Reply
Great information. I’ve always found that sellers are relieved to see short, plain English forms like your short option. They’re much less intimidating to them, and make you look like the “easy” option.
Brian Dickerson´s last blog post..Double Your Browser Speed & Stop Spinning Your Wheels
By Beverly (1 comments) | Reply
great work,, very helpful please continue such good work.
By Ernest (5 comments) | Reply
Karl – according to Equity Trust Company you can do the option from a Roth IRA
They have educational materail on how to set it up correct so it past the IRS rules.
By KC (1 comments) | Reply
JP – Question re: option begin date and end date. How long do you want to tie the property up? And should the begin date be the date that you present the option to the seller? What if he delays signing a day or two or seven. This would then shorten your option time…right?
By Mike (5 comments) | Reply
JP On Option Contracts. Good videos with some super tips. However, me thinks maybe more important was your suggestion that listeners take a contract law class. I knew of this but just haven’t done it yet. So not I am, thanks to you, determined to give it a go if I can find one available. What’s that they say ” If you think education is expensive then try ignorance”.
I notice in a couple places you use the words “Option fee and then you call them a “down payment”. I’ve read other places where you should NOT call them a down payment. What’s up. Is there a difference? I brought this up here in case there is a difference then others would know of it. When you reply would you also PM me the answer as I do not visit these sites often. Thanks
By Jackie (1 comments) | Reply
Great info!! One question… say you found the house and you want to try to find a buyer. How do you know whether you should use a purchase agreement and then assign that or use an option agreement? I had heard before that the option agreement always allowed the seller to “keep looking” for a buyer and be able to sell if they found a buyer first. So I figured the difference would be the purchase agreement “locks” you in and the seller can’t sell it to anyone else and the option agreement gave you the opportunity to find a buyer while allowing the seller to still look too. But you’re saying that the option agreement gives you total rights to the property so what’s the difference – when would you use one versus the other?\
By Karl (6 comments) | Reply
Hey JP, rookie question. Do banks allow you to control a property with an option contract? And do you as the buyer send your option contract to the bank to sign? Thanks.
By Karl (6 comments) | Reply
Thanks for the info about Equity Trust Co.
By Karl (6 comments) | Reply
Hey JP, I hope this isn’t a dual posting, rookie questions: Will a bank allow you to use an option contract when purchasing a REO?
Secondly, who provides the contracts, the buyer or the seller?
By Ken Obrien (2 comments) | Reply
Great resource of information! Thanks JP. I will check your website regularly!!
By Cassandra (1 comments) | Reply
JP,I’ve never met ya,but I sure like ya! Thanks so much for the vids,the forms, but most of all for keepin’ it simple! This girl likes it simple ’cause life’s complicated enough. Great site.
By Franklin Homes (1 comments) | Reply
They have educational materail on how to set it up correct so it past the IRS rules.
By Ivan (1 comments) | Reply
appreciate you sharing the forms with us, they’re very helpful. Thanks for taking the time and effort
By Joanna (2 comments) | Reply
JP, I feel so blessed to have stumbled upon your site. Not only is your information so thorough, but you make it simple and easy to understand. PLUS, I can’t believe all the forms you have for free and now I just saw these awesome videos!! Thank you for doing this, I AM HOOKED on your site and all your amazing content!!! LOVE IT!!
By Joanna (2 comments) | Reply
Hi JP,
Newbie question: If you find a good deal on a house and want to find a buyer, but the seller says they want to work with an agent (or they already are), can you still do an option agreement or purchase agreement or does the agent have exclusive right to the property? I’m a little confused…
Also, is “real estate option” the same as “option agreement”?
Thanks.
By J.J. Simmons (1 comments) | Reply
http://www.simmonsholdings.org
These option agreements are GREAT! Very “to the point” for the layman seller and investor just stating in wholesale. Thanks guys I have gotten some good info from the great questions here. Good luck to all!
By Desi (1 comments) | Reply
JP, I commend you on a job well done and I found your videos of explaining how to assign contacts and r. e. option contracts very educational and to the point. Thank you!
By Jack C (1 comments) | Reply
Hey JP great vid..
I got a few questions..
1) Can this option be recorded and therefore “cloud up” the title? I think one of your other forms-”Affidavit and Memorandum of Option Buying” does, but I was wondering if this can have the same effect as the affidavit.
2) If it does have the same effect, does it also need to be notarized?
3) If it does need to be notarized, by a long shot do you have any idea how I might get it notarized across 2 states(I live in one, seller lives in another) and also record in yet another state?
I appreciate your time, thanks JP!
By patrick (2 comments) | Reply
JP,
Thanks for the awesome info. In filling out the option contract I need a little further explanation on the option fee. This is simply the legal consideration to make contract valid? When does earnest money come into play? I am not quite sure of the difference.
Thank you.
By Eric (5 comments) | Reply
If I understand correctly, once you assign the option contract and collect your fee (via assignment of option contract?), you’re out of the picture entirely, right? If your seller and your end buyer can’t come to terms in the end or the buyer doesn’t perform that’s his own problem when it comes to the assignment fee, right?
Next question, I am wondering about inspection. Would you put it under option contract without inspecting, and then let the buyer assume the contract that has its inspection contingencies? Would a smart buyer buy the option before inspecting the place and paying the assignment fee?
Anyway,I don’t mean to get too convoluted but I’m hoping you could clarify the role and timing of assignment fee, earnest money deposit, inspection/finance contingency periods, etc, in an end-to-end transaction that involves seller-wholesaler (with option contract)-end buyer (who assumes option contract).
Thanks!
Eric´s last blog ..3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data
By Eric (5 comments) | Reply
are you saying that recording the option is up to you, but it solidifies your equity interest should there be any challenges?
Let’s say you have an option contract that lasts 14 days. On day 15, if someone seems a posting of yours on the internet for that property (that you made during your option period), are you in violation?
I’m asking because I never thought through how perfectly a (flexible) option might be for having legitimate listings so you can build a buyer’s list, even if you don’t think realistically you will be able to sell it.
Eric´s last blog ..3 Secrets to Reading Housing data for the Real Estate Investor, Part 1: Understanding Seasonally-Adjusted Data
By David (9 comments) | Reply
Hi J.P.,
Thank you for the down loaded forms!
But my computer locked up on the page to send to three or more friends. How do I get back there so I can do that. I realy want to see your vids on filling out the forms.
Thanks again,
David
By David (9 comments) | Reply
Hi J.P.,
Got the page thanks, now it will not send, as it says I have an email address that is not right.
That can’t be as they are all active contacts, any sugjestions?
Thanks,
David
By David (9 comments) | Reply
Hi J.P.,
Could not get them to send from your page so I copied sent them via my email. I know I will not get your vids in a nice neat grouping, but I realy wanted to get your info to some people. Thanks for your Testimony and busness model.
David
By Brandon (5 comments) | Reply
J.P.
I’m about to submit an offer using your very handy option agreement form. I just need a little clarification before I do. Does a Purchase agreement need to accompany the option agreement? Or does the purchase agreement get filled out when I exercise my option?
Thanks,
Brandon
By Matthew Dada (3 comments) | Reply
Hey just downloaded your 53 real estate contracts! Thanks! I had a couple of questions though if anybody can answer. I am a new investor looking to close my first wholesale deal. I was combing through your wholesale contract and I noticed that you were using a attorney to close. I was wondering since I would be using a title company, would it be necessary to change that in the contract. Also, I did not notice in your contract for a clause protecting me if I did not perform my duties or failed to close within the given time in the contract. For example if I did not find an end buyer, how would I handle that? And thirdly, is it possible to hold off on paying the earnest money til you find an end buyer, and have the earnest money they pay you cover the earnest money for your contract with the seller?
By Matthew Dada (3 comments) | Reply
And what other contracts or documents do I need to have between my seller and I to be covered before I go and market this wholesale deal besides getting the title search done.
By Cesar (1 comments) | Reply
I have a property which is a remodeling project. I placed an add in the paper looking for an investor. luckly I found one but there is just one problem, I’m having trouble closing the deal. The deal is for $20,000 would it be wise to offer him a real estate option contract? Would it make him feel secure? Do you have any suggestions on how to close?
Thank you for your time as well as the info presented at youtube. Fell free to Email me.
My friends call me Cess!
Thanx again!
.
…jp
By Matthew Dada (3 comments) | Reply
Ok this is Matthew again, and pardon me if these questions might seem mundane to you but, Im trying to get a good grasp on these contracts as a newby! After finding a end buyer for this property, what contracts are used next to follow up the transaction and which contracts ensure that I the investor get paid for my equitable interest? If you don’t mind just quickly explaining the process after I locate the end buyer and the contracts to use(all the way to closing). I would really appreciate it!
By fred unger (1 comments) | Reply
Thanks for both of these downloads JP and for the opportunity to donate to a very worthy organization.
Fred Unger
God Bless and have a Merrry Christmas and blessed New Year
By Imran (1 comments) | Reply
Thanks for taking the time and effort.
NewBie Question: I have a option to purchase aggrement, now I want to list the property on MLS. my question is who is gonig to sign the listing paper Optionor or optionee (me)
By Olubiyi Odeinde (1 comments) | Reply
Thanks a Million,Was just about considering an option contract when i saw your article and the forms.As an upcoming Real Estate Investor. It did give me a simple explanation of how a simple contract works.
Please keep it coming pal.
By Jue (1 comments) | Reply
A new concept for me, only heard 'real estate option' last week….. Enjoyed your videos on youtube and thanks for the gifts.
By Bob (5 comments) | Reply
Thanks J.P. for sharing all of your knowledge! It is very helpful. I would like to share my Mac knowledge with you. For Mac users all you need to do is click on the target once and it will download. That's the beauty of a Mac.
By jp moses (111 comments) | Reply
Awesome, thanks Bob!
By Doug (5 comments) | Reply
JP,
First off thank you for creating this site. I have learned more here than any other REI site.
My question is on the “Fluffier Option” .
It states “3. PAYMENT OF OPTION FEE. Purchaser agrees to pay the Seller a down payment of ________________ plus all closing costs upon the Execution Date. “
I am confused on what the option means when it says all “plus all closing costs”. Why would you have to pay closing costs upon the execution date?
Thanks
By jp moses (111 comments) | Reply
You know, Doug, that's a good question. Honestly I've never really thought that line through before. Always just kind of took it to mean that I'll be paying closing costs at closing…but as you're pointing out, that's now actually what it says.
I guess I'd say, change it.
Thanks!
…jp
By Whipid22 (1 comments) | Reply
Great little pit stop. Thanks for the enlightenment. I've been asking around about this type of contract with no success, and finally stumbled across your info. Thanks again for everything.
By Armyofficer1982 (1 comments) | Reply
How does the whole changing of contracts work exactly. I understand how to get a property on contract, but then how would I go about backing of the contract/pass it off to an end buyer or an investor so I end up getting paid?
When and where does this happen?