Negotiating an option

Hi! everyone.
We have just completed a small subdivsion and are negotiating an option on a larger parcel of land.

My question, seeing that we are fairly novice developers, is - "Has anyone here negotiated an option?"

What typically is the structure - eg xx% non refundable for a six or twelve month period.

There is also the potential for some vendor finance - again, how what sort of ways can this be done - how can the reluctance for the vendor to have a second mortgage be overcome - what % interest, etc.
 
Hi guys! I posted this question over the weekend - yes, early on Sunday morning, and didn't get a reply.

Can anyone help? We have an offer in at the moment for 15 acres of developable land - I can share the experience in a little while. Can anyone help with stories of negotiating options?
 
Freedom,

I am in a similar situation where a vendor would like a long settlement. I can probably get a permit for 3 townhouses for the site and onsell.

I was thinking that I may be able to do this with an option.

wombat
 
Dear Freedom,

Quick reply:

Percentages for options are commonly 5% (But if you can negotiate less then go for it.).

Vendor Finance. Again what's in it for the vendor?

-Higher sale price?
-Higher interest rate? (Of course why lend your money in order to make a lower interest rate on something that may have a higher perceived risk?)
-How long has the property been on the market? (Lack of interest gives you more leverage to negotiate this in your favour.)

Also what is driving the vendor? Real estate and developing is all about solving sellers problems and you being able to profit by doing so.

What is the vendors problem and how can you provide the solution? (The answer is not always obvious unless the question is asked and understood.)

Cheers,

Sunstone.
 
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