Option Type Deals, Flipping without Taking Title

[CarrieKoch]

I`m finishing up a deal in Ontario where we had an option at 200, reno`d and flipped to and end buyer for 215. Instead of going thru the "option" type channel we just wrote up a renovation contract for $15k which the seller signed. I know I`m relying on trust really but have kind of protected myself with the reno contract as we do have a renovation business and we did really do some work (we will provide seller with all receipts for purchases and contractors 5k...the rest will be our "labour").

When I first mentioned option to the lawyer I had at the time he said the option didn`t really mean anything was just a piece of paper. That what I`d actually need to do is have an assignable contract with the seller and then assign it to a new buyer. I didn`t like this as I didn`t want to seem sketchy trying to sell the house that I didn`t own. Plus I had no idea what the final offer, conditions and closing date would be. The reno contract seemed easier as I was able to sell on behalf of the owner who doesn`t live in the province. So we just did a buy the owner sale. I put together the offer for the buyer and negotiated between the parties.

I would like to do more of these deals but I want to have a system that really protects my interest. But I also don`t want to come off as a real estate agent or selling houses!

Has anyone done this type of deal and how did you structure it?

 

[JimWhitelaw]

An option is a real contract - I`m not sure why a lawyer would say it isn`t. In the future, you might consider including a copy of a sales contract as an article of the option contract - with wording to the effect that the eventual sale is to be completed according to the attached contract, etc.

Nothing sketchy about assigning a contract. You can use separate assignment agreement (contract) to assign a standard sales contract to someone else.

I did a flip a while back without taking title. What I did was:

1) Write up a standard contract with me "and/or assigns" as the buyer.
2) Had the seller sign an acknowledgment that I may assign the contract and they might close the deal with someone else.
3) Created an assignment of contract agreement for the sales contract, had it signed by original seller and my buyer.
4) Created an amendment to the original contract updating the name of the buyer to the ultimate purchaser.