Using a non exclusive option, is a great way to start doing deals if you are nervous about signing a purchase and sale contract, or the owner would still like to sell it himself. BUT it can also be used to pick up more deals that so close to the number you need to be at to make a profit .
Suppose the seller is willing to take what he owes, but what he owes is $5,000 more than what you wanted to spend. I would suggest that you still get it put it in your pipeline using the non exclusive option.
The seller owes $35,000 They will take what they owe on the house, $35,000. But, when you do the numbers, the offer calculator says you should offer $30,000.
So, you go back and try to squeeze every penny out that you can to get to their existing loan amount. You change the repairs from $10,000 to $7,500 in the hopes that a rehabber can either do it for that amount, or that he won’t notice. And, you change the calculation from ARV x .55, to .60. Because, there may be a buyer out there that will just pay a little more. And guess what?
You’re still short…
It’s not the end of the road, you can do one of two things.
1. You could put a contract to purchase on it, in the hopes you can sell it.
2. Use a non-exclusive option contract.
This allows you to market the house at the same time it does not commit you to buying the house. If you do find a buyer, the seller has to sell it to you. If you don’t you simply cancel your option. Its a no?strings?attached contract, and it works Great
Here’s the conversation:
Mr. Seller, I am afraid that I won’t be able to purchase your home. The numbers just don’t come out right for me. However, I have many property?buyers in this area, who may want to buy your home. So, what I’d like to do is to get a contract signed, which says that my intention is to locate a buyer for you, but which is also non?binding, should you find a buyer on your own. Does that sound good?
Then, you get the non-exclusive option contract signed for $35,000. This contract is assignable, just like your Purcahse and Sale agreement..
And, you begin marketing it like you would if you had it under a PSA. Mark it up $10k and get the word out. You never know? And, if the seller finds a buyer first, you tear it up and wish him luck, mentioning that if the buyer fails to close, to make sure he calls you.