How to Calculate the Resale Price for a Real Estate Option

The first step in the process of reselling a real estate option is to calculate its resale value. There is an old adage in real estate sales, which goes something like this: "Getting greedy will get you needy." Please keep this sage advice in mind when you are pricing your options for resale. In other words, do not try to suck every last dime out of the deal. Instead, price your real estate options so there is enough profit potential to entice prospective buyers. I always try to sell my real estate options for at least 10 percent of the property's market value. For example, on a property with a fair market value of $250,000 that I have an option to buy for $190,000, I would price my option at $30,000. This way, I would be fairly compensated for the time and effort that it took me to get the property under option. And whoever buys my option would still be able to buy the property for $30,000 below market value when he or she exercises the option. You can use the same step-by-step instructions that I outlined in Chapter 12 to estimate a property's market value. When calculating the resale price of a real estate option, do not forget to include the cost of:

1. Searching for the property.

2. Buying the real estate option.

3. Putting the property in a marketable condition.

4. Marketing the property.

5. Your time spent on the transaction.

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