Why The Option Contract is Getting Blown Up By Title Companies!
Posted on 03. Jul, 2009 by Patrick Precourt in Investment, Preforeclosure, Real Estate
(No Ratings Yet)Title companies and foreclosing lenders are steering further and further away from the so called “almighty” Option Contract! Listen in as I go over why the option contract is a way of the past, why first listing a short sale property at the total debt owed is ridiculous, where to find the real players in your area, what your marketing message should focus on and much more! Visit www.FridayCoffeeBreak.com for more real estate specific videos.
Linda Bryant
03. Jul, 2009
Pat -
Not to mention names but a very successful consultant (whom you started under) is definitely guiding me to use Option Contracts. My title company is OK with them. Are you suggesting that I will have troubles with the foreclosing lenders and possibly the end buyer’s lenders still? I can’t use a land trust (title company won’t do) so what sort of contract do you suggest that will give me equitable title so that I can re-market the property with interest in the property?
Thanks!
Lori Ann
03. Jul, 2009
Pat,
Do you have any documentation that supports your statements that title companies don’t like option agreements? Do you have any underwriting bulletins from any title ins. underwriters?
If you don’t answer this question, then I’ll presume you don’t have anything to back up what you’re saying.
Thanks,
Lori Ann
Patrick Precourt
03. Jul, 2009
Linda, its not so much your title company, it is the title for the end user and not all title companies have a problem with the option. Many are just beginning too. Back in June 2007, I started to spread the work that the trust is really beginning to be challenged and its time to start doing business another way. Today, the Trust agreements, as were commonly used, are for the most part, obsolete in our transactions. Note however, you can still get away with using them in some areas…and it will always be like that. Back to the option agreement. First off, as stated, it is getting challenged by title companies and lenders alike. All of them? Of course not…but im giving you the heads up. Second, now this is a big one….why use the option agreement in the first place????? Somebody out there PLEASE fill me in.
What should you use to secure the right to the property and give you equal control by virtue of the equitable interest granted in a properly executed agreement…..A good old fashion PURCHASE AND SALE AGREEMENT!!! Thats it!! Of course, be sure to add the proper disclosures relative to our business. But thats it! cheers
Patrick Precourt
03. Jul, 2009
Lori, you can presume what you like and if you are that fond of the option agreement …have a blast.
Please take the time to read my response to Linda above. Day by day it is getting more difficult to get our end users (party C)financed. This will continue to get harder before it gets better. Abnormalities in a transaction will get more and more challenged. Especially in our already ABNORMAL, double close transactions. A standard purchase and sale agreement is NORMAL. Option agreement, in a typical residential transaction, is ABNORMAL (w a few exceptions). Why add more friction to a challenged transaction when you don’t have to? …..and again I will post the question… what value does an option agreement bring to the transaction that is not already granted in a Purchase and sale agreement???
And now to close this long winded response. I have see a dozen or more transactions, nation wide, crumble down on the heals of the famed option agreement. I dont make money promoting the use of the purchase and sale agreement. Im sharing with you rock solid advise for your success. I couldn’t really give a crap one way or another what we use. My primary focus is to CLOSE DEALS and GET PAID.
Sam
03. Jul, 2009
I have to agree with Pat I had to option contract with Chase and they shot both of them down and said that they do not work with option Contract they would not return none of my calls and I found out that they threw my file away. NO MORE OPTION CONTRACT for ME!!!
Craig
03. Jul, 2009
The use of the option contract was recently written and published on the front page of the Tampa Tribune and St. Pete Times (negatively I might add by some kid don’t remember his name just his hair color) Not even two weeks later the Florida Association of Realtors published an article warning Realtors to avoid. The next week the Florida Attorneys Fund wrote to their 6,000 members to no longer fund option contract transactions. That is a small taste of what is going. FYI I closed 4 transaction in the last 45 days with option contracts. So, yes it can be done but going forward I am going to choose to swim with the current not against it.
Dan
05. Jul, 2009
Hi Patrick,
As you can see, I didn’t get to take my Friday morning break until Sunday evening, but I enjoyed it just as much. Thanks for your direct answers to all of the questions thrown your way, including the ones above.
Lisa Potter (CA)
06. Jul, 2009
We submitted an option contract and ASC would not accept it. They said to re-submit on a standard P&S Agreement. I’m sure I could have argued with them, but why? Just food for thought…