During negotiations and prior to the closing, you must explain to the optionor that he or she will have to sign the title transfer documents for the property— real estate purchase agreement and warranty or grant deed—at the same time the option agreement is signed. I have found that if you make it clear from the very beginning of negotiations that signing all the property title transfer documents is part of the transaction, this will not become a deal-killer later on. And it has been my experience that if you act in a competent professional manner and do everything exactly as you say you are going to do it, you will gain the trust of most reasonable property owners. The investors who have the most problems with optionors are the ones who come across as slick wheeler-dealer types and have a hard time giving people a straight answer. However, when an optionor does change his or her mind and refuses to sign the real estate option agreement, addendum real estate purchase agreement, and a warranty or grant deed at the closing, you need to find out exactly why he or she is refusing to do so. In most cases, you will hear some excuse about how he or she does not trust any attorney or title or escrow agent to hold the documents. Or, optionors will claim that they are afraid that you are going to "steal their property right out from under their nose." If this is the case, tell the optionor you will not be able to buy an option on the property unless he or she agrees to sign the property title transfer documents.
Whatever you do, never, ever fork over any money for an option without first getting the optionor's acknowledged signature on all of the title transfer documents. I once received a frantic telephone call from an option investor in Bakersfield, California, who made the mistake of not getting the optionor to sign the property's title transfer documents at the same time the option agreement was signed. According to the investor, the optionor appeared to be a "sweet old lady," who had told him that she was a retired schoolteacher. So, he figured he had nothing to worry about and did not ask her to sign title transfer documents. Well, lo and behold, three months later, when he notified her that he wanted to exercise his option and buy the property, she told him in no uncertain terms what he could do with his option. He told me that he felt like the world's biggest fool. I told him to record his option agreement against the property's title and to send her a letter threatening a lawsuit if she did not refund his $5,000 option fee within 48 hours. I do not know how it turned out as I never heard back from him. But I do know that all of this could have been easily avoided if he had insisted that all of the title transfer documents be signed at the closing.
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