Powerful Option

“Introduction To Options”: The least expensive and most powerful way, that I know of, to control a property without fully paying for it is to use an option. What is an option? An option is a unilateral agreement between two (or possibly more) parties wherein the OPTIONOR (the owner/seller of the property that is the subject of the option) has agreed to sell the property with a certain price and terms, to the OPTIONEE (the prospective buyer of the property) as some time in the future.

In the typical option agreement, the OPTIONOR (seller) is obligated to sell the property with the agreed price and terms; however, the OPTIONEE (buyer) is not obligated to buy. This is why the option is referred to as a unilateral agreement.

During the time period from the date of the option to the agreed upon time for the option to be exercised (the buyer completes the purchase of the property) the OPTIONOR (seller) can’t sell the property to another party, even though he may be offered a higher price.
Why would an owner/seller of a property agree to an option? There are many reasons why. Here are a few:
1. The owner has had no other interest by prospective buyers.
2. The owner does not want a sale at this time for tax reasons.
3. The owner does not have to pay taxes on the option payment from the prospective buyer until the option is either exercised or forfeited.
4. In many cases, the prospective buyer, with permission of the owner, will add value to the property by conducting research fro development or use. If the option is not exercised, this benefit will revert to the owner.
5. The owner may need the option payment to pay other expenses; taxes due on the property, for example.

By using options you can control huge assets with little risk. In addition, you can sell your option to another party. This, in my opinion, is a better way to go than “Flipping” (buying the property from one party and immediately selling to another party). Instead, a better way is to buy an option on the property and sell the option. If you own an option, you can sell it at any price you can get. What you sell it for has nothing to do with what you paid for it. More on options later.

These posts are the opinion of the author who is not engaged in rendering legal, accounting, or investment advice. If such advice is required or desired, the services of competent professional persons should be sought.