102 Comments

1. 

   Peggy on at

   Love this idea. A gal can’t have too many forms! Keep ’em coming…

2. 

   Mark on at

   This is great JP! Please do more of these videos/forms. I’m a newbie and this information is very helpful. Thank you!

3. 

   Daniel on at

   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!

4. 

   Scott Taylor on at

   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

5. 

   Ryan on at

   I loved this Idea JP! you Rock! the Tutorial is awesome!

6. 

   Amaru on at

   What do you know about FLex Options?

7. 

   Terry on at

   Thanks JP! Would you be willing to roleplay and show us how you speak to sellers and answer their objections?

8. 

   jim on at

   Just what I was looking for. Google is your friend JP, I may just stick around this site for a while.

9. 

   JP Moses on at

   @jim – Wonderful, Jim! Glad you stumbled upon me! And even more glad I could hook you up with an option agreement! 🙂

   …jp

10. 

    gary on at

    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.

11. 

    Curtis on at

    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 .

12. 

    Tim Cronin on at

    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.

13. 

    JP Moses on at

    @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! 🙂

14. 

    Dean on at

    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

15. 

    JP Moses on at

    @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

16. 

    Swarup on at

    Wow. Thanks very much jp. It’s awesome to see someone explain this stuff. I needed this! …and more of this kind of information.

17. 

    Dub on at

    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!

18. 

    Rachel on at

    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?

19. 

    JP Moses on at

    @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: https://reitips.com/real-estate-assignment-contract

    🙂

    …jp

20. 

    Paul on at

    Hi thanks for the tutorials it is like having the ob1 of contracts in your ear

21. 

    Karl on at

    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

22. 

    Karl on at

    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

23. 

    Karl on at

    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?

24. 

    Gionki on at

    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?

    Great questions, Gionki. My quick answers are:

    1) I got to a point where almost all my REI business happens through my network of friends and referrals and such. Most eventually get there. But at first I got a lot of leverage out of my REIA group meetings and networking there, and also I placed a couple of “dummy” ads in the paper to generate some calls.

    2) I don’t have to clean it. I just keep up with who’s in a “buying mode” and what they’re interested in. Then when I come across a deal, I know pretty quick whether or not I have a potential buyer. I don’t deal with hundreds and hundreds of buyers. I prefer the more personal approach with a handful of players.

    3) If you mean, listed a house in the MLS that I was wholesaling, then no. If you mean, contracted a house in the MLS, then wholesaled it, then yes. 🙂

    Hope that helps!

    …jp

25. 

    john on at

    Have would you word a secondary offer cancellation and let the seller still market the property ?

    Thanks
    

    The exact wording isn’t magical, but it would be something like this:

    “While this option remains exclusive while it is in effect, Optionor shall retain the right to continue to market the property for sale. If another potential buyer presents a purchase offer of preferable price and/or terms to the Optionor, then Optionor shall present Optionee with and written notice of said offer, and Optionee shall within 60 days either accelerate performance on the existing Option agreement, or to cancel said agreement altogether. This is a “right of first refusal” on behalf of the Optionee.”

    I just came up with that off the top of my head, but I think it would work OK. I’d still suggest you run it by a local RE attorney though, just to be sure.

    Hope that helps!

    …jp

26. 

    Branson Real Estate on at

    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!

27. 

    Arlen on at

    This is excellent.

28. 

    Arlen on at

    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?

    Hi, Arlen. Great question.

    If I’m using an option agreement in a transaction, there’s seldom a reason not to just assign the option contract to the new buyer. Unless for some reason there are some terms in there you’d not be comfortable with someone (your buyer) assuming.

    Make sense?

    …jp

29. 

    Billy on at

    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

    Hi Billy, thanks for posting.

    Your Realtor is what we call an “inside the box” thinker. He’s been trained by his broker and a myriad of real estate classes to see things only one way.

    For example, whenever I’ve purchased a house from an individual (non-listed) property, as a result of my own direct marketing, I’ve yet to put any earnest money in their hands. Instead we use the contract itself as legal consideration, which is perfectly legal in TN (although most Realtors would tell you otherwise b/c of simple ignorance and assumptions).

    It’s true most any Realtor worth his salt will ask for earnest money and a POF, but most is not all. For example, lately there’s been a trend on FDIC listed properties actually requesting verbal offers b/c they’re so desperate to move the dang things.

    I’ve yet to find an REO listing that didn’t require those two items, however. So in the REO arena, you’ll just have to find a way to contend with it. You can still “wholesale” but you’ll just have to do a simultaneous closing or come up with transactional funding and do a double closing (which isn’t hard to do these days).

    Hope that helps. I can’t write a whole book about it, but know that the limitations your Realtor sees can be overcome with creativity and an open mind. Start networking with the Realtors other investors in your area commonly partner with and maybe they’ll see a little different perspective.

    My best,

    …jp

30. 

    Diane Boerstler on at

    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!

31. 

    Diane Boerstler on at

    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…

32. 

    JD on at

    Great video, and info. Q, is there a way to use an Option on an REO? Thanks.

    Hi, JD. I’ve never known of a way to use an option on an REO listing. They don’t want to get strung along. Only a buyer seems to fit in their box.

    …jp

33. 

    Arlen on at

    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?

34. 

    Brian Dickerson on at

    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

35. 

    Beverly on at

    great work,, very helpful please continue such good work.

36. 

    Ernest on at

    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.

37. 

    KC on at

    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?

    Hi, KC. Great question.

    You can have the option term for whatever time frame makes sense. I’ll often use 30 days if I’m just looking to wholesale and I think I can get it done quickly. I’ve done 60 days. Some folks will do, like, a year. It’s just up to what makes sense to you.

    The begin date: I’d make it a specific date, and also give them a deadline by which they need to sign/agree.

    Hope that helps!

    …jp

38. 

    Mike on at

    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

    Hi, Mike. Thanks for the props, and you know I agree – far too many underestimate the value of taking a contracts class.

    To answer your question, it’s really just option consideration. If I used the words “down payment” it was just a slip of the tongue. The two should not be confused in my opinion.

    My best,

    …jp

39. 

    Jackie on at

    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?\

    Hi, Jackie.

    The option agreement is a unilaterial agreement and a purchase agreement is a bilateral agreement. In other words, in a purchase agreement, both the seller and buyer are on the hook to each other – one to sell and the other to buy. In an option, the seller is on the hook to sell *IF* the buyer does in fact elect to buy. But the “buyer” has the “option” to either move forward or not. Hence the name. You’ll see the terms of the option agreement lay this out pretty clearly.

    No, the seller’s not supposed to have the automatic right to look for another buyer — unless you (as the optionee) elect to give him that right.

    Personally I use an option with an individual seller (not a bank) when I’m honestly not sure if there’s a viable deal there for me or not. And I usually tell the seller if another buyer presents himself, they can come to me and tell me, and I”ll either close in 10 days based on our original terms, or I”ll release them to go with the new buyer. That helps them feel better about me “tying up” their property (which I’m not really doing after all — but I need the equitable interest in my court so I can legally market the property for resale without a real estate license).

    Hope that helps!

    …jp

40. 

    Karl on at

    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.

    Hi, Karl. No, I’m afraid they don’t. At least not for now. If things keep getting worse for them, you never know! Word on the street is the FDIC is now accepting verbal offers! Whooda thunk that woulda happened? 🙂

    …jp

41. 

    Karl on at

    Thanks for the info about Equity Trust Co.

42. 

    Karl on at

    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?

43. 

    Ken Obrien on at

    Great resource of information! Thanks JP. I will check your website regularly!!

44. 

    Cassandra on at

    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.

45. 

    Franklin Homes on at

    They have educational materail on how to set it up correct so it past the IRS rules.

46. 

    Ivan on at

    appreciate you sharing the forms with us, they’re very helpful. Thanks for taking the time and effort

47. 

    Joanna on at

    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!!

48. 

    Joanna on at

    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.

    Hi, Joanna. You can use an option agreement on a house listed with an agent. The only problem is that the agent may very well advise them against it.

    Most agent’s won’t understand what you’re doing or how it could be in the homeowner’s best interest. And a confused mind almost always says, “No”. Don’t forget the agent has a fiduciary responsibility to protect their buyer, so you can’t really blame them for “playing it safe” in their eyes.

    But as far as whether you’re technically allowed to secure a listed property with an option, there’s no problem there.

    You also asked, “…or does the agent have exclusive rights to the property” The agent will typically have an exclusive right to list – meaning no other agent can also simultaneously list. But you’re not listing their property as an agent when you secure an option on the thing…you’re a potential owner with an equitable interest. Very different kind of thing, and one does not conflict with the other.

    Make sense?

    And yes, the real estate option and option agreement are the same.

    …jp

49. 

    J.J. Simmons on at

    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!

50. 

    Desi on at

    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!

51. 

    Jack C on at

    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!

    In most places I believe a document must be notarized in order to be recorded. So as long as you get it properly notarized, I’m pretty sure you could record it….and yes, it would cloud title. I’ve done that before.

    With regards to doing it across state lines, I believe the notarization format can be slightly different from state to state. So I’d think the format/wording would need to match whatever state you’re going to be recording the document in. But I have no clue about whether or not your notary has to be approved by that state in order for it to be official. You’d have to ask a notary public that one.

    Thanks for commenting, and hope that helps!

    …jp

52. 

    patrick on at

    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.

    Hi, Patrick. Here’s the deal…
    “Option Consideration” is the fee (some amount of money typically) that you pay the owner in exchange for giving you the option to purchase. It’s fair consideration in return for what he’s giving you, which is an exclusive right to purchase for a period of time. If it helps, kind of think if it like when you pay for a parking place. That spot is yours for a limited time, based on your fee.

    But with option consideration, that amount can be whatever both parties think is fair and agree to. Be it $1.00 or $1M dollars. Also keep in mind you (if you’re the optionee) won’t be getting your option consideration back if you elect not to exercise your option. It’s the seller’s either way. It’s not a deposit, but more of a fee you both agree to.

    If/when you decide to exercise your option to purchase, then you’d put an actual purchase contract in place, which would deal with any earnest money at that time.

    Make sense, man?

    …jp

53. 

    Eric on at

    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 =-.

    To your first question…that’s not typically how it works in my experience. I almost always take my profit when the deal w/end buyer closes. Just seems fair to me. If I were in their place, that’s what I’d expect also. In most of my wholesale deals I’ve been a line item on the HUD.

    Second question…you could do it that way. I don’t really pay for home inspections…I do it myself and make sure there’s enough room in the deal for me to make some mistakes. I’d say do your best to inspect it before you put your option down…but in the end, it’s not that big a deal…cause you’re just buying an option. You’re not stuck buying the property if something pops up later.

    Regarding your third question, this could vary but here’s one potential sequence for an A-B-C transaction:

    • B gets an option to purchase property from A (option for a set period of time, at a set price, paid for by way of option consideration of some sort)
    • B (you) assigns option to C (end buyer), and agrees to take assignment fee as a line item on closing HUD. (you could get a note from him if you want something more in writing, then at closing your $$$ received in in payment of the note. Just a thought.)
    • C is now in B’s place, and approaches A about exercising his option to purchase. They work out terms, put a purchase agreement in place and set a closing date.
    • At closing, C buys from A, and you get a check from the title company for your part.

    So that’s one way to make it work. Make sense?

    …jp

54. 

    Eric on at

    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 =-.

    I’m not really sure what you mean by your first question…you don’t have to record your option. I never have in the past. The option gives you equitable interest you can then use to market for resale though.

    Regarding your second question, I’ve honestly never thought of that. But I surely wouldn’t think you’d be in violation of anything, not any more than if someone picked up a newspaper and read your ad to sell the property from last Sunday, even though your option expired the following Wednesday. If I were ever challenged on it (highly unlikely) my strong feeling would be that the date you actually published the ad is what would count. That’s my opinion at least.

    …jp

55. 

    David on at

    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

    Hi, David! I think this is the page you’re looking for…

    Thanks! And enjoy those forms!

    …jp

56. 

    David on at

    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

57. 

    David on at

    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

58. 

    Brandon on at

    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

    Hi, Brandon! Choice B! 🙂 Go get ’em!

    …jp

59. 

    Matthew Dada on at

    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?

    Hi, Matthew – glad you like the free forms!

    Regarding using an attorney to close versus a title company, I don’t see it’s a big deal. I’d just fill in the name of the title company. But since they’re Word files feel free to change “attorney” to “title company” or “closing company”.

    Regarding clauses to protect you, I usually just rely on my short inspection period. If my “partner” (i.e. potential buyer) doesn’t like the deal, then it didn’t pass inspection. But this isn’t something you want to drag out for long in my opinion. If you’re not pretty certain you can get a buyer and you’re not prepared to close yourself in that case, then I’d suggest using an Option Contract instead of a Purchase Contract.

    Regarding Earnest Money, remember I have my attorney holding an earnest money check on my behalf. I don’t give it to the seller directly unless I’m dealing with a listed property (like an REO) in which case you don’t really have much choice. Usually I’ll just put $100 earnest money per property for unlisted deals and have never had a seller balk when I explain I just can’t put up thousands of dollars on every house due to the number of deals I’m involved in. They seem to always understand because I’ve already built rapport with them before that point. Make sense?

    …jp

60. 

    Matthew Dada on at

    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.

61. 

    Cesar on at

    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!

    Hi, Cess – thanks for commenting!

    Honestly I don’t have enough information here to advise you. You say you’re having trouble closing the deal…but don’t say why. Is your potential buyer having a hard time getting the cash to close? Financing? Is he feeling insecure about something? If so, what? Have you continued looking for other buyers?

    If you can offer some more info, I’ll gladly do my best to toss in my $0.02 for ya

    .

    …jp

62. 

    Matthew Dada on at

    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!

63. 

    fred unger on at

    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

64. 

    Imran on at

    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)

    Hi, Imran. Thanks for commenting.

    If you have a legal option in place, then you have what’s known as “equitable interest” in the property, which gives you the right to market for it’s resale — as long as you don’t actually sell it until after you’ve actually consummated your purchase (even if only moments before). And the right to market the property should also include the right to LIST it in the MLS should you so elect.

    So if it were me, I (Optionee) would be the one signing the listing docs. But my standard disclaimer applies here. I’m not an attorney and I don’t play one on TV. I’m not acting as your agent or legal counsel, and you should always consult your own experts before taking any action/inaction based on my opinion here. 🙂 (There, butt effectively covered.)

    Thanks again for posting – hope that helps!

    …jp

65. 

    Olubiyi Odeinde on at

    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.

66. 

    Jue on at

    A new concept for me, only heard ‘real estate option’ last week….. Enjoyed your videos on youtube and thanks for the gifts.

67. 

    Bob on at

    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.

68. 

    jp moses on at

    Awesome, thanks Bob! 🙂

69. 

    Doug on at

    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

70. 

    jp moses on at

    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

71. 

    Whipid22 on at

    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.

72. 

    Armyofficer1982 on at

    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?

73. 

    gadiel on at

    hey i have 3 other business partners and i placed their email address to refer them. i wasn’t able to an error message would pop up and say that reitips does not see these emails as valid

74. 

    Earl Halstead on at

    Hi JP, I want to thank you for the great info and video..You seem to clarify it more than Tim Mai. I am not taking nothing from him because he is great with his info that that he gives away. God Bless both of you guys!!

75. 

    jp moses on at

    You’re welcome, Earl – and thanks for commenting, man! God bless you as well.

    …jp

76. 

    Jerry on at

    This question is so simple I’m sure I’m missing something, but here goes anyway. Why would anyone give you an option to buy when thats what there doing anyway( just not on paper) with everyone, if so, then they would restrict themselves to only you and no one else. Doesn’t stand to reason.

77. 

    jp moses on at

    Great question, Jerry. And the answer is simple. I explain to them that I may have a colleague or partner who could buy this thing, but I’m not sure. I’m not able to explore that option, however, unless I have at least an option in place on the property…just to make sure our agreed upon terms are set before I go shop around for someone else to flip it to.

    Said another way, if the seller will grant me an option at a price that works for me, I’ll invest my time and effort to help solve his problem by tapping into my resources for a final buyer to flip it to.

    Make sense?

    …jp

78. 

    Jerry on at

    jp,

    Thanks, yes, that puts it in perspective and as I was thinking about it today, I guess it would also be handy to maybe tie it into a Lease Option type Deal, or is that not a way of intention?

    Thank you for responding so quickly, Ive been following just about everything you’ve put out in the last year. You’ve got some amazing stuff, keep up the great service, you make Real Estate Fun!!

    Your follower,

    Jerry

79. 

    Jerry on at

    jp,

    You wouldn’t happen to know how I could get a hold of a Lease Option form package would you.

    Jerry

80. 

    lymorgan on at

    i have a question i just downloaded your forms and i wanted to know if these forms can be used for commercial properties, such as apartment buildings and mobile home parks and specifically can i use either of the option forms on this page

81. 

    jp moses on at

    Sure you can use them on commercial…might be good to customize them a bit based on the transaction.

82. 

    SJ on at

    Thanks. While I will not be using your forms, they are very well done and you demonstrate a superb command of the subject. I appreciate your time and generosity.

83. 

    jp moses on at

    Thanks, SJ. I provide the forms as a service to whomever might find them useful. Thanks for your kind words – they are warmly received!

84. 

    HurricaneMasterminds on at

    Thank you, I like you clear, concise instruction!

85. 

    Bdave34 on at

    these contracts are a godsend to a broke beginer like me

86. 

    Peekay on at

    Jp,
    Nice presentation. Will get in touch soon,
    Peekay Kumar

87. 

    Ryan on at

    Hey JP, I was wondering is it possible to put an option on a house between a buyer and a seller if the house is currently listed with a realtor? 

88. 

    jp moses on at

    Hi, Ryan. Yes, but it’s likely the seller will still owe a commission to the agent. Unless they have some special arrangement that buyers who don’t come directly through the agent don’t generate a commission – which would be very unusual.

    Typically listing agreements state that during the listing period, the agent’s entitled to a commission regardless of where the buyer comes from, so long as the relationship is initiated during the listing period, even if the actual sale is after the listing period.

    It’s just a way of protecting the agent’s interests in keeping the owner from skirting around them. And I think it’s reasonable too. I used to be an agent…they do a lot of work without any pay when listing a house, plus often come out of pocket for marketing expenses…all in the hopes of getting a commission.

    So bottom line: Yes, if you put your option on the property during the listing period, chances are the owner will owe the agent a commission.

    ——————-

    { REItips.com }

    { REIology.com }

89. 

    Ryan on at

    Thanks JP! Awesome answer, awesome video and awesome site!! Thanks again for all the free forms. 

90. 

    mike on at

    is there a standard window of time that you go with for the beginning and expiration date of the option? Do you just try to project a rough time frame based on how long you think it will take to market the peoperty?

91. 

    Kalen on at

    JP,

    I came across this post from the “legally paying bird dogs” post you did years ago. I have a question about how the option contract works with a bird dog (I’m a wholesaler). Do I have to have them come with me to the seller’s house to get put on the option contract as principle?

    Thanks for all your great info!

    -Kalen

92. 

    jp moses on at

    Hi, Kalen. I don’t see any real reason to have the bird dog come with you. I wouldn’t worry about it personally.

93. 

    Kalen on at

    Thanks for the reply! I have really enjoyed getting to read your posts and see your perspective on REI. It’s great to see a fellow Christ follower doing the REI the right way!

    So how would they assign me the contract if they are not principle?

    Where in the process would I have them fill out the option contract? (would I do everything normal as a wholesaler; meet with seller, get contract, open escrow, etc?)

    As you can see I’m a little confused. I’m trying to get some bird dogs (the legal way) and I understand how to fill out the contract (thanks to your fantastic posts!), but I’m just confused on the practical steps of when/how to fit in the option to my process…

    Thanks again!

94. 

    jp moses on at

    Hi, Kalen. Sorry for the confusion.

    Well if the bird dog just brings you nothing more than a name and address, then I’d say pay them a flat fee as a “consulting fee” on the HUD. Then they won’t need to be a principal in the transaction…and treating it as a flat fee rather than a percent of the deal helps keep you out of the “practicing real estate without a license” realm, in my opinion.

    If the bird dog brings you a deal in which they’ve already done some negotiating and have rapport with the seller in place…then yes, it could be helpful to have them along with you, to introduce you to the seller as his “partner” perhaps…then to keep things legit, you could both be on the option/purchase agreement, and he then he could quit claim his piece to you at closing, in return for a fee.

    Another option would be to put have him secure the option, then have him assign the option over to you in return for his fee (at closing, as always).

    Lots of investors don’t go through all the steps to do it legit like this…they just fly under the radar and no one notices. But if you want to keep things as straight as you can, these would be the ways I’d do it.

    Disclaimer: I’m not an attorney, please consult yours first before taking any action or inaction based on my input here (butt covered, hopefully)

95. 

    El Jefe Covfefe on at

    I would offer two more differences between an option and a contract:
    First, the option buyer ordinarily has to pay some substantial consideration for the option, that will be nonrefundable if the option is not exercised (but will be credited if the option is exercised), whereas a contract buyer will ordinarily have a due diligence period during which he gets a free look at the property and can cancel the contract during due diligence and receive a full refund of any deposit monies.
    Second, the contract buyer is ordinarily held to an implied standard of good faith and fair dealing, which means that if he cancels the contract in bad faith, then the seller may have legal remedies, whereas the option buyer can decide not to exercise for any reason or no reason, without fear of legal repercussions.

96. 

    SusanM. on at

    Great article. I just completed a three day course where I spent two thousand dollars and and twenty four hours and didn’t get as much out of it as I did here. Please keep it up.

97. 

    Wesley Hall on at

    Thank You for this great wealth of priceless information.

98. 

    JP Moses on at

    You’re welcome, Wesley – thanks for stopping by and for commenting!

99. 

    mike on at

    My attorney told me option contracts are illegal unless you are licensed with a real estate license or securities license so how are by passing these requirements?

100. 

     jp moses on at

     Hi, Mike. With all due respect, whatever attorney told you that option contracts are illegal w/out a license either didn’t understand what you meant or is just flat out wrong. Attorney’s aren’t infallible and will at times offer you squishy answers confidently b/c you’re paying them to be the expert… but really don’t understand b/c it’s not their area of expertise. Ask a REAL ESTATE attorney and you’ll get the right answer. The fact is, using an option contract has been a longstanding, tried and true, time-tested, proven tool for people to secure a legal, equitable interest in a piece of real estate… and it does not require any kind of license, any more than it takes a license to enter into a purchase contract… as an individual representing yourself, you can enter into this agreement at any time. Again, no disrespect intended to you or your attorney… just shooting straight here. Thanks for commenting!

101. 

     Maja on at

     Hi Thank you very much for your help! I was wondering if you could please explain me how do you assign the option to the end buyer? What contract do you use? I do not understand the process, I am doing wholesaling Thank you

102. 

     Maja on at

     Hi Thank you very much for your help! I was wondering if you could please explain me how do you assign the option to the end buyer? What contract do you use? I do not understand the process, I am doing wholesaling Thank you!