Closing an option deal.

Hi daba

As you can see, with a "standard" call option your strike price and profit margin are visible to your buyer.  As I mentioned earlier, we use an option document that includes a "Higher Price" clause.  The effect of this clause is the new buyer does not see your strike price or profit margin.  Thi may or may not be attractive to you.  It depends how you are setting up your transaction(s).

Cheers,  Paul

Hi Keiko
I guess theoretically you could auction an option, although i've not heard of it, but that doesnt mean it hasn't happened… Its' only my guess but I would have thought that at auction at some point the buyer would have to know the strike price and option price and the difference. It'd be hard to auction it off at your price, then at signing say, ok well you really just have to give me X, then give the vendor Y in however many months/years… I would have thought youd' have to disclose that at some point regardless.

This is all why tryin to onsell options without a DA or similar value add is not as easy as some like to suggest, especially in a quick turn around situation..selling sizzle without sausage is how one agent put it to me..buyers, and financiers, are a lot more aware of options and the processes etc than they were a few years back..

Probably doesn't help you any but good luck with whatever you decide.

Good info Michael……. like I always say… do your Due Dilligence!!

Not sure mate. One way would be to talk to an agent familiar with auctions. Typically in a resi deal there's no price disclosed other than a 'reserve' price which the vendor gives the agent, that then dictates when the property is 'on the market' as far as I know.. so you may well be ok in an auction scenario as all you'd need to disclose at the beginning is really that its an option for auction and the length of the time remaining the option. Price you may find might be something that you're ok not to disclose or withold until contract signing etc.
I know some agents have options for sale, and they list them as "option for sale, assignment fee $xyz." nothing else is disclosed..

Of course I could be wrong!

Hi J-Iou

I'm starting something similar to what you're discussing above.  Was wondering if you could help me. 
You mentioned stamp duty is payable on options in some states.  Do you know what stamp duty is payable in Victoria on options?  And where do i get an options agreement?  Any lawyers you could recommend?

Hi Paul, Thank you for the advice, I'll be sure to contact Lewis.  I called a couple of lawyers last week but didn't get far.  What do you mean by a 'lease'?  Is this in the event you're paying a rental fee on the property to the point you want to onsell the option?

Can u settle if you haven’t on sold your option?

These can expire and catch you losing your option fee + your upgrade/value-add costs

Hans
Yes you can settle if you choose to, depending on the type of Option agreement and any 'out' clauses you may have inserted. If it's a Call Option, you can settle if you choose but they can't force you. If its a "put only' option they can if they choose force you to settle. If its a Call and Put, it will depend on the type of clauses such as "subject to suitable and acceptable DA being obtained" and so on and so forth.
If you choose to assign the option to someone else (on sell it) then it's their problem, not yours.
Hope that helps,

Matt.

Let me try:
Option – firstly this is an agreement between X and Y where X can buy Y's property, but doesn't have to. Y must sell to X if the conditions are met. So Y is locked in, but X isn't

Call Option is an option where X thinks the price is going to rise.
eg.  X buys a $1000 option on a $500,000 property with a strike price of $520,000.  X would only buy an option if he thinks the property will rise above $521,000 (strike price plus his option fee). Y sells the option because he thinks it won't and he will get $1000 for his troubles. Here the seller is locked in.

Put Option. This is one where the seller thinks the value will fall.
Seller Y sells X and option to purchase with a strike price of $500,000 and an option fee of $1,000. If the property goes down in value below $499,000 X ain't going to buy – because it has gone down in value. Y will have gained by keeping the option premium. Here the buyer is locked in.

Put/Call is a combination of the above.
The seller is locked in and the buyer is locked in. Neither can get out of the contract. These used to be popular because you could enter into a binding agreement without entering into a contract of sale for the property. Just an option contract. Stamp duty would be avoided if the buyer wanted to onsell before settlement. State Govts have introduced new laws to prevent this now.

And/or Nominee
This is where you sign a contract and put you name and ' and/or nomiee' after it. Before settlement you are able to nominate someone else as the purchaser.
This was used, illegally, in the past by some to onsell before settlement and avoid paying stamp duty. It would only have been possible if you had entered into a written agreement with the nominee before you signed the contract (but people used to back date these agreements). These days the OSR are much more strict regarding this and it could result in stamp duty being paid twice.

When you enter into an option agreement you are entering a separate agreement than the contract of sale of land. Usually the option agreement would have the contract of sale attached to it as an annexure, but you are not entering into that contract until you exercise the option.

I don't think so. The profit for the middle man would be the price the option is sold for less their purchase price.
eg $500,000 property with an option agreement sold to X for $1,000 with a strike price of $550,000.

X sells the option for $20,000. ie they reassign the option to another person Z for $20,000. X's profit is $19,000.
Z then signs the contract to purchase for $550,000 and settles on the property.

I am not sure, but I think there would be double stamp duty (if the OSR found out) unless, maybe, there was a prior agreement between the nominee and nominor.

Yep, i assigning an option would be a CGT event.

I am not sure. Some people try to mystify things or make them look harder and then come up with a complex solution.

I guess they are hoping to keep the option fee. Same with shares. If you sell options on your shares you can make great returns in addition to your normal dividends. If you sign a contract of sale for land then it is more complicated with keeping deposits, assigning it etc.