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Option Agreements And Conditional Contracts

One of the advantages of this route over the alternative option to using a conditional contract is that you do not need to continue the purchase if you decide that you do not want it. You simply have the option to do so, as the name suggests. When selling or buying land, you may hear the terms "conditioning contract," "option contract" or "pre-emption contract." While all of this is essentially about selling land from a seller to a buyer, there are considerable differences. An option agreement differs from a conditional contract by the fact that neither party is required to close the sale unless the option is exercised. Under the terms of an option contract, it is up to the buyer to decide whether he or she actually wishes to complete the purchase at a later date (but during the period indicated in the option contract). After the exchange of contracts, the parties must sign a document that effectively transfers the property. The time between the exchange and the conclusion is usually taken by various requests and checks by the buyer`s lawyer, but these can actually be made earlier. If push comes to push, each ground transaction can be compressed to 24 hours. So you don`t need a lawyer to enter into a contract if you know what you`re doing.

In practice, there are many things you need to do properly. The treaty is by far the most complex document in the funding process. For many self-builders, the options come in their own, where land or property is not already on the market. You may have discovered an opportunity and are directly addressing an owner, but there is no building permit yet. Another type of option is a pre-emption agreement in which the owner must offer the property to the developer before he can sell it to others. Option agreements are often aimed at developers who wish to obtain a building permit or third-party financing, as they give them the option of not continuing the purchase if a satisfactory building permit is not issued or if they do not receive adequate financing. An option agreement is binding only on the seller - because the option holder may choose not to exercise it. If the owner does not exercise until the last day of exercise, he dies and is dead.

It follows that it is very important to use as comprehensive a treaty as possible. If you agree with someone to buy their land, they expect lawyers to produce papers. But if you call one night with an agreement under your arm, he may be scared if he is six pages long and needs a lawyer to explain it. So if you are dealing with a demanding owner, certainly do not take any risks and do it properly with a complete document. But if your other party is probably worried, you might be better off with a simpler document, although this could cause delays or other problems later on. The versatility of the options also means that certain strategies allow you to profit in a static market. For example, if you sell a put option, if you feel that the price of the underlying land remains stable or, at the very least, does not fall dramatically, you can include premium income. As the option is about to expire, the current value of your short put will be eroded and if, as you predicted, the underlying price has not changed much, you will be able to close your short put position with a cheaper premium than the one where you sold to open the position, and you will benefit from a profit.


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