is there a rule of thumb for a percentage to option a property & term? Is it common to pay taxes during option

I have a developer who wants to option a group of residential properties for one to two years. Is there a rule of thumb for monies put at risk?
In Buying Property - Asked by Karen K. - Sep 10, 2012
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Answer(s)

Barbara C.
Broker/Agent
Corfu, NY

In my opinion your question would be more likely to be answered by either a financial consultant or an attorney. And, it's the developer's job to know. The laws are changing so fast, and are different in every State, that asking them on a nationwide forum is likely why you have had zero answers. Within the law, everything in real estate is negotiable; what's common and what the 2 parties decide to do could be different, also. The developer is going to need an attorney to either draw up contracts or review them.

Sep 11, 2012
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Barry R.
Developer
Arvada, CO

You should consider having the developer produce a line item development plan he/she is intending to pursue during the 2 year option period. The plan should show the sequential steps the developer is planning to take along with milestones they intend to reach. 2 years is a long time and may be required if actions such as annexation, zoning, site/project planning, permits and financing are involved.
If the developer knows what they are doing, they should have no problem creating and showing you their plan. If they can't or don't want to comply, pass on them UNLESS they are willing to pay earnest money which goes to you. If they don't want to pay earnest money, pass on them. Earnest money can and should increase as milestones are met since the developer's risk is decreasing at the same time.
Good luck!

Sep 23, 2012
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