If you do not learn anything else from this chapter, please learn this: Without exception, require that the following property title transfer documents be signed by the optionor, witnessed, and notarized:
1. One copy of the real estate option agreement with witnessed and notarized signatures of the optionor and optionee.
2. One copy of the addendum Real Estate Purchase Agreement, like the sample in Chapter 20 (page 210), with the witnessed and notarized signature of the optionor as seller only, with the buyer's name and signature left blank in case the option agreement is assigned to a third party.
3. One copy of the warranty or grant deed, with the witnessed and notarized signature of the optionor as grantor and with the grantee's name left blank in case the option agreement is assigned to a third party.
4. Two copies of the HUD 1 Settlement Statement, listing the buyer's and seller's closing costs. For your information, there is a fillable HUD 1 Settlement Statement on my web site, www.thomaslucier.com.
Also, prior to having the optionor sign the title transfer documents, take the time to double-check them for mistakes in:
1. Transposing numbers and letters.
2. Spelling and typing.
I always have the optionor sign the title transfer documents at the same time the real estate option agreement is signed and witnessed in the presence of a notary public. I then have all the property title transfer documents held in escrow by a reputable third party during the option period. This way, once the real estate option is exercised, all the documents necessary to close on the purchase of the property under option will have already been signed, witnessed, and notarized. Doing this eliminates any last-minute scurrying around to get the optionor to sign the paperwork to close the deal and makes buying the property under option simply a matter of going to the designated attorney or title or escrow agent with the funds necessary to close on the purchase. Most important for you, however, or for whoever buys your real estate option, doing this will eliminate any possibility that the optionor can renege on your real estate option agreement by refusing to sell the property after the option has been exercised. In fact, if you follow the advice that I am giving you here, there will be no need for you to ever meet with the optionor again. On my last six option deals, I have never had a face-to-face meeting with the optionor. All six deals were negotiated via telephone and e-mail, and all of the title transfer documents were signed out of state in the presence of a notary public and returned to the third-party escrow agent via U.S. Postal Service Express Mail.
Once these four documents are signed by the optionor and sealed by a notary public, have them held in escrow by a reputable third party, such as a real estate attorney or title or escrow agent, during the option period. This way, all the property title transfer documents are at one location and:
1. Readily available for review by potential assignees and buyers who may doubt their existence.
2. Readily available for review by mortgage lenders financing the purchase of the property.
3. Readily available to facilitate a fast closing for whoever exercises the real estate option.
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