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Hi All!
Has anyone worked with an investor who uses an "Option Offer" Basically what this is, the investor puts in an offer to the bank on a short sale, but the offer is contingent upon the investor immediately listing the property and trying to find a buyer(same day buy and sell). After a predetermined amount of time the investor can walk away.

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never heard of this one...new to me.
These are nothing but traps for already troubled homeowners. They would get homeowner and you commited to the offer yet they have option to buy. You want to secure a short sale with serious buyer with pre approval + good faith deposit in the bank. This way lender, seller and you, all have stake in this deal.

If investor want to buy a house at a great deal they will give you a conventional contract. I do it everyday.....
thanks for your input, the whole deal was not sitting right with me. I am not that type of agent that takes advantage of people when they are down and certainly don't want to become one of "those" that do that!
Happy New Year
Brenda
ok, so where is the benefit? Maybe I am missing something but, I can't find any benefit to either the homeowner, the Realtor or the bank by doing this "Option Offer" deal.

I understand it's a bad idea but, in an effort to better understand the situation, can someone describe to me, what the argument is on behalf of the so called, "investor"?

Is the "investor" trying to say he can get more money than the Realtor can for the home?
I know several investors that do this in theory. They work with a title company that allows them to perform a double closing. They then make an offer to a bank for an REO. If accepted they mark up the price and sell to the second buy in a back to back closing. This is becoming popular especially with REO property.

I have completed a two my self and can recommend a title company that allows this if you like.
I have done this both as the listing agent and the selling agent. It can be of benefit to both the Buyer and the Seller when done properly (aka when the buyer using the option is not trying to scam anyone).

A - B - C
short sale seller - Investor with Option - Third party Buyer


Basically the best way to do it is with 2 transactions that close back to back, a lender that does not need the title to be seasoned, and an esrow company that will close them one right after the other. I don't like it when people do them as selling their option or a double escrow. It is cleanest when the investor actually takes title, even if it is just for a short period. I will try to explain in breif and feel free to give me a call or email with questions. Everyone and I mean everyone involved must sign disclosure forms and give notice to the other parties. Also, the investor has to be willing away from the deal if they cannot get it on their terms, void their option and allow C (the third party) to purchase the house from the Seller.

It starts like this Buyer uses an option to control the real estate and cloud the title. Next they submit an offer to the bank at 65% of FMV (fair market value). The then relist the property as the owner of record and disclose that this sale is from B to C, its a short sale and it may take time to get this put together. Next they order a interior BPO and insisit on being present when the agent does the BPO. They meet the agent and give them the comps. The agent gives the BPO to the bank and the bank generally counters to the orginal offer. Once they settle on a price (ie 250,000) on the A to B transaction, the investor sells it to C for 265,000 and makes 15K in profit. Investors generally do not make a lot of money doing this, or at least the ones that I have seen. They make their money in the doing a bunch of them. The banks are ok with it as long as the investor is not making a huge profit and it would cost them more to continue to have and non preforming asset and foreclose. The third party or Buyer C is ok because they are getting a home at or slightly below FMV.
My question is why would the bank do this knowing that the house is worth more than $15K, WHt not just let the listing broker find a buyer for $265?
Because it is done and they do not have to mess with it any more and lose any more time and money. It has to be demonstrated to them that it is in the banks best interest to do the deal or you are right they won't take it.
The bank has no idea you are selling it for $15k more. Once they sell to "A" they are out of the transactions.
The bank does know what is going on, thats where the option comes into play, If A doesn't get a buyer then A doesn't buy the house and walks away,in the meantime The HomeOwner had false security that the A was buying the house. My problem is that as a Sellers Agent, it is my responsibilty to get the best price, terms and conditions for the Seller. Telling the Seller that A has the best price ,terms and conditions is not being truthful if there is another buyer in the wings that will have better terms and conditions,ie. not an option. I think this is crossing the ethics line.
In my opinion this is more beneficial to the investor as they don't really have much stake in the deal and can walk any time they want. That can put the seller and bank at a disavantage as time could be wasted with a buyer who is not really motivated to buy. Also, the emotional rollercoaster the seller will have to go through, no matter how much you counsel them, is something that would not rest well with me. There is plenty of business and ways to make money in this market without having to kick someone when they are down.
Carlos , I have to say I totally agree with you! and that is what I basicly told the "investor"

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