The very last step in my option buying decision-making process is to develop a worst-case scenario for the property under consideration. I do this because I am a pragmatic realist, and I fully understand that there is always a fifty-fifty chance that something could happen during the option period that could prevent me from reselling my option to a third party. And this is why the very first question that I always ask myself when I have a property under serious consideration is this: What is the absolute worst thing that could go wrong after I buy an option on this property, and could I survive it financially? In most cases, the worst-case scenario is that the property could be foreclosed on, come under the control of a federal bankruptcy court trustee, or be forfeited to a government agency, or I will not able to sell my option before it expires. In cases like these, the worst that can happen is that I end up losing my option fee. Granted, this is not something that I relish, but I could survive it financially. However, if I came up with a financially devastating worst-case scenario for a potential option property that had a much better than fifty-fifty chance of occurring, I would pass on the property. And I suggest that you do the same!
Was this article helpful?