|Re: option contracts||<– Date –> <– Thread –>|
|From: Mac Thomson (ganeshrmi.net)|
|Date: Sun, 20 Apr 1997 10:43:40 -0500|
> I am looking for information on option agreements made for purchasing > property. I need to know what the standard block of time to tie up the land > would be - for example - 30 days or 6 months?? Also, what is the amount > people have used as earnest money - money that they would lose if the option > is not exercised. > > Leslie Maniccia > Cascadia Cohousing Leslie, I just finished negotiating the purchase of about twice as much land as we'll need for our community for $630K (we'll divest ourselves of the portion that we can't afford). We put down $20K in refundable earnest money with a closing date in 6 mos. We also included in the contract the option to extend the contract twice for 100 days each time for additinal $10K earnest money deposits for each extension. These extension earnest money deposits are nonrefundable, however, so if we don't close on the contract, we lose $10K or $20K, but we get our original $20K back. If we do close on the land, all of the earnest money goes towards the $630K purchase price. There is an important distinction between option money and earnest money. If you buy an option on land, that gives you the right to buy the land for a specified period of time for a specified price. The option money buys the option, not the land. It does not go towards the purchase price as earnest money does. I think that Chris Hanson's "Cohousing Handbook" covers this well. We wanted 6 months until closing because of our particular approval process, which can be slow. The extensions allow us the opportunity to buy additional time if we run into problems swith the approval. Our contingency to get us out of the contract is worded so that we have great discretion in determing if the approval we get is satisfactory. For example, if we get approval, but only if we do a million dollars in highway access improvements, we can get out of the contract with no loss if it's within 6 mos. You need to tailor your contract to fit your particular needs. A real estate attorney and/or developer that you trust is invaluable. BTW, the terms that we got are even better than I hoped for because we have a motivated seller. Also, I was willing to give on the price in order to get our terms. -- Mac Thomson San Juan Cohousing ganesh [at] rmi.net Durango, Colorado "Courage is grace under pressure." - Ernest Hemingway
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