Buying an option to purchase

From: Sherlock .

Hi again

Still tossing it around.

The property adjoining my own is likely to come on the market in the not so distant future. A friend suggested I "buy an option to purchase"

Has anyone heard of this and how does it work?

Cheers, SH
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Reply: 1
From: Paul Zagoridis

Talk to your lawyer. Say "I'd like to take an option to buy my neighbour's house, do you know how to do that?" If he knows, follow advice then...

Walk over to neighbour, say "I'd like an option to buy your house, whatcha think?"

Smile and assume the close.

Oh! OK what is it? In this case an option is the right but not the obligation to buy your neighbour's house. You pay some non-refundable money (the option fee) and over the next X weeks/months/years you have the right to buy the house for $Y.

E.g. You pay $5,000 to your neighbour and agree that in the next 6 months you can buy his house for $295,000. If you exercise the option he has to sell the house. If you don't exercise he keeps the $5K.

Make sure the option is correctly structured for your state (hence call #1 to you lawyer). Also make sure you can assign or trade the option (someone may pay you more than you think the house is worth).

Paul Zag
The Oz Film Biz site is archived at...
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Reply: 1.1
From: Michael Croft

We use this in developing a lot of the time. Along with the option (up to two years) goes the right to submit plans for redevelopment approvals. What do you think happens to the values of the properties with plans in place before settlement?? ;-)

Michael Croft
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