Documents Must Be Held in Escrow during the Option Period

•a word of warning: The longer you stay in this business, there is a better than 50 percent chance that you are going to unknowingly buy a real estate option from a dishonest property owner who will try to renege on your option agreement. Granted, this is an integrity problem, which harkens back to the old adage: Any agreement is only as good as the people who sign it. However, this is exactly what happens all too often to uninformed option investors who end up getting ripped off by unscrupulous op-tionors who take their option money but later renege on the real estate option agreement by failing to sell the property under option after the option is exercised. Nevertheless, this potential problem is easily avoidable when all the property transfer documents are signed by the optionor and witnessed in the presence of a notary public and held in escrow by a reputable third party during the option period. In this way, whoever exercises the option can purchase the property without first having to get the optionor to sign a real estate purchase agreement and a warranty or grant deed transferring the title to the property. Plus, as you will find out, having all of the title transfer documents signed, sealed, and ready for delivery is a tremendous selling point when you want to assign a real estate option agreement to a third party.

Over the years, I have had only one optionor renege on a real estate option agreement by refusing to sell the property under option after I had exercised my option. Please note that this occurred before I smartened up and required that all title transfer documents be signed by the optionor at the same time that the option agreement is signed. Let me start off by saying that the optionor who pulled this stunt would never be confused with a candidate for a Rhodes scholarship. I mailed him an exercise of real estate option notification letter, in full compliance with the terms of our option agreement, which was just like the sample in Chapter 20 (page 207). I sent the notification letter via U.S. Postal Service Certified Mail, return receipt requested, and he personally signed for it. And when I called him on the telephone after I did not receive a response from him to confirm the closing date, he had the gall to tell me that he had never received anything from me in the mail. Furthermore, he stated something to the effect that pigs would fly before he would ever sell the property to me for the previously agreed-upon sale price. Needless to say, I was not a happy camper! I reviewed my options and decided that my best course of action would be to file a small claims lawsuit against him in Hillsborough County Small Claims Court to recover my $2,000 option fee and court costs. I went ahead and filed my lawsuit and the optionor failed to show up in court, and I obtained a default judgment against him for $2,178, which I had recorded against the title of each of the five parcels of land that he owned in Hillsborough County, Florida. A couple of months later, this swell guy left a profanity-laced message on my telephone answering machine, threatening to have me arrested for placing judgment liens against his properties. The following week, I received a cashier's check for $2,200 from his attorney, along with a request that I return a notarized satisfaction of lien as soon as possible. I promptly cashed the check and sent the former optionor a completed satisfaction of lien, on which I purposely did not have my signature notarized. The optionor had a conniption fit when he received the non-recordable satisfaction of lien and telephoned me and once again threatened to have me arrested. I told him to buzz off! And 30 days later, in full accordance with the Florida statutes, Mr. Slicky-Boy received a recordable satisfaction of lien from me.

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