In the latest years, Real Estate Options have become increasingly popular thanks to the flexibility they offer the buyer and the seller alike. But Options can be tricky to navigate. Such contracts possess specific attributes that are customised to each client which, in simple terms, means the complexity is higher than that of a normal Real Estate investment transaction.
Regardless of the complexity though, Options are highly profitable. But what does it mean to Option your place? And, how can you benefit from it?
What is an Option?
An Option is a legally binding contract between the owner and a property developer agreeing on a future date of purchase at a fix price. The date of purchase can vary from a month to a year, in which time the property can’t be sold nor bought. Normally, the contract is accompanied by a fee paid by the developer to the owner.
This contract is a way for developers to seize up the market before purchasing a site. But it can be extremely profitable for you.
Because the initial contract fee is not refundable, by the time of expiration, if the developer decides not to buy that money stays inside your pocket. No strings attached.
However, if the property developer decides to buy, you will get paid the agreed price in full.
Another thing to keep in mind is that most contracts offer a higher price of the current value of your property or extra profits from when the development is finished.
Either way, you win!
But, how else can you benefit?
Well, the uniqueness of an Option is the off-market transaction. This means there is no need to find a buyer, meaning you won’t need to pay agent commissions, marketing fees, home staging or renovations. All this costs can add up pretty high, and will only give you a chance to enter a highly competitive market with no guarantee of selling. A bonus for anyone who hates strangers visiting their home, this is the perfect opportunity to avoid open houses. You only have to remember, the developer is ready to buy now. No need to invest a couple more hundred thousand dollars.
However, one of the best things is that you get to stay in your home for an extra set amount of time. There is no need rush or stress about moving because it won’t happen straight away. Depending on what is agreed between you and the developer, you can take your time to find the best place for you.
TL;DR: Sell for a higher price now. Move out later, but get the money now. No agent commissions. No marketing fees. And no open houses.
Written by EB