Can anyone give me some information about the use of ‘% option agreements’ in lieu of a cash down payment/deposit.Where do i obtain such a document? and has anybody got any stories to tell using such an aggreement.
for example if i put in an offer with a 6 month settlement along with an option agreement for 1% of the offer price which is non refundable. the option is then paid to the vendor at the settlement date – purchase price. This gives me the ability to walk away from the deal for what ever reason all it would cost me would be the 1%
Darren[8]
Hi Darren
An option agreement can be drafted up by any good property solicitor. They are very flexible documents, and can certainly be a good strategy to implement. However, in a rising market you will probably find not too many sellers interested.
Developers often use option agreements to control some land they are looking at rezoning, DA approvals etc. If they cannot get that approval, they will walk away from the deal. As you say, you only lose the % you paid as the option fee.
You do have to pay some money to the vendor upfront – or else what’s in it for them? If you can improve the property with DA etc., or are absolutely aware of something which will ensure values rise, you may even have to offer a higher price to the vendor to agree to such terms, or else they will just sell for their terms today. Either that or you need a vendor who would be happy with some money now, and maybe a sale in the future – cos that’s what it is for them. Some now, but no guarantee of a sale when the time comes, and they can’t sell to anyone else.
Cheers
Mel
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