Please, whatever you do, do not, I repeat, do not use the same real estate purchase agreements that are used by real estate licensees in your state to document the purchase of a property under option. I say this because virtually all of the real estate agreements used by real estate licensees are written to protect the licensees' sales commissions and the legal rights and interests of the sellers who have listed their property through real estate brokers. In addition to not being buyer-friendly, these purchase and sale agreements are also not investor-friendly, as they are geared toward traditional run-of-the-mill real estate transactions with conventional terms. Instead, I recommend that you hire a board-certified real estate attorney to prepare a purchase agreement that protects your rights and interests as a buyer. And make certain that the following 14 key provisions are included in your purchase agreement to clearly define the terms and conditions of the agreement and the rights and responsibilities of both the buyer and the seller:
1. Parties to the agreement: Designate all parties to the purchase agreement as buyer and seller to include their legal status as to whether they are a single
How to Exercise Your Option and Buy the Property FORM 20.1 Sample Exercise of Real Estate Option Notification Letter
September 10, 2005
Mr. David D. Jones
5300 West Oklahoma Avenue
Tampa, FL 33629
Dear Mr. Jones:
Please take notice that on this tenth day of September 2005, I have elected to exercise the real estate option given by you to me, on July 9, 2005 to purchase the property therein described, pursuant to the terms and conditions of our Real Estate Option Agreement and Real Estate Purchase Agreement held in escrow by Mr. John B. Good, attorney at law, whose law office is located at 6907 Charleston Court, Tampa, Florida 33607.
Donald S. Reed
Copyright Thomas J. Lucier 2005. To customize this document, download it to your hard drive from Thomas J. Lucier's web site at www.thomaslucier.com/optionforms.html. The document can then be opened, edited, and printed using Microsoft Word or another popular word processing application.
individual, husband and wife, or a business entity such as a corporation or limited liability company.
2. Earnest money deposit: State that the option fee shall be used as the earnest money deposit and applied toward the down payment.
3. Legal description of property: Use the exact legal description that is written on the recorded deed of the property in the purchase agreement.
4. Purchase price: State that the firm purchase price of the property is the same as the purchase price listed in the option agreement.
5. Terms of purchase: Specify exactly how the purchase of the property is going to be financed.
6. Marketable title: Specify that the buyer must be able to obtain an owner's title insurance policy commitment letter from a title insurer in order to close on the purchase of the property.
7. Assignment of the purchase agreement: Include a clause that the buyer has the right to assign or sell the purchase agreement to a third party.
8. Default by buyer: Specify that the earnest money paid is the sole and exclusive remedy in the event that the buyer or buyer's assigns fail to close on the purchase of the property.
9. Default by seller: State that the buyer or buyer's assigns shall have the right of specific performance in the event the seller defaults on the agreement by refusing to sell the property.
10. Eminent domain: Specify that the buyer or buyer's assign shall be entitled to a full refund of the earnest money deposit paid, plus any accrued interest, in the event the property is condemned by eminent domain prior to the closing date.
11. Buyer's right of entry: State that the buyer or the buyer's assigns have the right, upon giving the owner 24 hours' notice, to enter the property and inspect, repair, market, and show it to third parties prior to the closing date.
12. Risk of loss: Specify that the buyer or buyer's assigns are entitled to a full refund of the earnest money deposit paid, plus accrued interest, in the event the property is damaged or destroyed by fire, storm, or earthquake prior to the closing date.
13. Right to examine records: State that the buyer or buyer's assigns have the right to examine all of the financial and tax records associated with the property prior to the closing date.
14. Seller must vacate property: Require that the seller completely vacate the property and grounds prior to the closing date.
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