Lease options are powerful tools, and to harness their
magic we need a basic understanding of what they are
and how they can work for us. It is important to have
an idea of the essential elements needed to make options
work:
The
Seven Essential Elements of Option Agreements
1) A willing seller
2) Property or land – the asset
3) A written agreement granting privileges
4) A consideration or option fee
5) An agreed purchase price
6) A time frame or term
7) A willing buyer
Let’s
look at each in a little more detail.
1. A willing seller
So the seller must understand what they are doing,
which means you must have explained it to them. One
objection Wendy and I often get from investors starting
out with options is “Why would any seller agree
to this?” There are many reasons why sellers
agree to grant terms and agree to your option offer,
and we will discuss that in a later post.
2.
Property or land – the asset
It goes without saying that there has to be something
of value, something desirable, for an option to work.
Be sure to do your due diligence and get necessary
checks done before agreeing to any property or land
option to ensure it has real value. One investor almost
paid £5,000 for an option on a property the
seller was claiming to own, but didn’t really!
3.
A written agreement granting privileges
A written agreement is vital, not just verbal. Lease
options are all about time and terms and time tends
to change things so you need to make sure that things
are clear from the start. It is important to protect
your interests and that is why when agreeing lease
options, everything should be down in plain English.
4.
A consideration or option fee
This is what makes your written agreement legally
binding, think of it as the stamp on your postcard.
The option fee (or consideration) doesn’t need
to break the bank, but it does need to be paid. It’s
interesting that there is no minimum, but the consideration
must be recognised in the UK as something of tangible
value.
5
An agreed purchase price
The price you will eventually pay for the property
needs to be clear and understood by all parties.
6.
A time frame or term
According to English law, the maximum allowable term
for an option is currently 21 years.
7.
A willing buyer
This may be you if you find your dream house and decide
to buy it using a lease option. It may be a tenant
buyer you are working with. In any event, the buyer
must understand and keep to the terms of the agreement
– or the privilege to buy at an agreed price
at a future date will be lost.
If
you want to learn more about Lease Options and how
they can help you on your path to financial freedom,
get yourself along to the best training in the industry.
14th-15th
May 2011 - Two day Learn Lease Options Live! Heathrow
London
