Earnest Money vs Cancellation Option Money, Discover the Secret-Trick to control the deal and profit

Gang, this is Mike with My Real Estate DOJO and I was just driving and had a great idea that I would implement and I will share with you. It’s a neat little trick that allows you to get extra money, when you do deals. Whenever you are selling traditionally, what I mean by that is when you’ve done a fix and flip or you’re a buy and hold guy and decided it’s time to sell and home or if you’re a wholeseller.

real estate seller flyer ads

Probably it’s not going to work with the whole seller as much, but if you’re a fix and flipper or you’re a buy and hold guy and you want to sell traditionally with the realtor a little cool trick that I like to do is to get more money is that normally when you get an offer on your home, the buyers realtor will say “We’ll give you a thousand dollars earnest money” or “We’ll give you give you $1500 or$500 earnest money” and don’t put that down. That’s okay, but I have a greater way of doing that. Instead of asking the agent to down $500 or a $1000 or whatever in earnest money, lower your earnest money to maybe $100 and then ask for the option money to be very high. What I mean by the option money is that a buyer has a realtor and they use a track or a traditional real estate contract, which every state has their own. In Texas it is called a track. When they use that, there is a state that the buyer has an option to cancel the deal and so what I do is that I have the realtor inform their buyer that I want a large option money for them to cancel. The reason is it’s very crucial, so pay attention.

When the buyer puts money into the title company as an S grow let’s say 5000 bucks, if the buyer decides not to do the deal what happens is that the buyers money stays in the S grow, the title company. If the buyer does not feel like releasing the information, then you are not going to get that $500, even though its your right to get it. For example, if the buyer decides to walk out and not do the deal, they do loose their $500 in earnest money that is an S grow, however it does not guarantee that you’re going to get the money. That’s whole point of what I am trying to tell you. If the buyer decides not to sign the release form that’s required for the title company then you are not going to get the money. This has happened to me many times for many different reasons. Sometimes its because they don’t want to the deal now, sometimes because they have a change of heart, sometimes they can’t qualify-whatever the story may be and then they don’t want to sign the release form, which means that I took my property off the market, I allowed them to buy it for a certain amount of days and then end of the day, when they walk out, sure the buyer looses some money, but I don’t get any of that money.

Some of the title companies and buyers are unethical and are not going to release the form for the title company to release the money. The company is not going to release that earnest money. A cool trick that I came up with is that I require all my buyers to pay me a high option for them to cancel.For example, if they want to put a $1000 in earnest money, I say do this, put a $100 in earnest, give me a $900 option and this option is for your buyers to be able to cancel out of your deal. What happens is that realtor is going to give that title company the $100, so its going to go to the S grow, but that $900 is going to come straight check to me. Now if the buyer decides to walk out of the situation for whatever reason, within or without the time frame of the auction, then I am already going to have that $900 in my pocket. What I’ve basically done is allow myself to be in control and demand that I need the auction money for the buyer to cancel, which is good for him, so now that he can walk out of the deal and if he walks out of the deal within the time frame that is allowed- I keep the money.

If he walks out of the deal outside of the time option, I still have his money. I don’t have to be at the mercy of the title company, I don’t have to be at the mercy of the buyer to sign the release form for me to get my auction money. So the reason this came is that many buyers have done that to me. I took my property of the market for whatever reason, they didn’t want to do the deal or couldn’t to do the deal and they were mad and they didn’t feel like i should get my $500 or $1000, I was in earnest in S grow. The way for me, using my imagination, I told my realtor“Hey, buddy, every time we are going to do it this way, it’s this way or the highway and that’s the way I am doing it now”. So if anybody wants to buy my property they are going to have some option period for them to cancel and I am going to need a large amount of money for option.

Now what is an option. An option is kind of like a contract, but its not a contract, because a contract is a two way street, which means that the buyer has to perform and the seller has to perform, but on the option the buyer has the right to perform, but they don’t have to perform. In other words, an option is an agreement that a buyer-seller come to together, that a buyer may do something in the future, may take this action in the future, but the buyer does not have to take this action. It’s a one-way road, whereas a contract is a two way road. As real estate investors, sometimes you could buy a property, or take control of them, we phrase it not buy, but take control through an option. In this case its not like that, but its kind of like that, because we are allowing the buyer to have an option take control or say “Hey, I want to get out of this deal”. Basically the reason that I use it is to safeguard myself and make sure I am in control and I have the money that the buyer is going to put instead in the S grow company, I actually have it in my pocket as option money.

A lot of the times I have my money in title companies where the buyer is gone, they lost that money, but they are not willing to release it to me and I am the one who took the hit, because I don’t have the option to sell it to another buyer who is interested. This is just a small little trick that I came up with just using my imagination, because I’ve been punched in the face many times, so I figured I might just share it with you guys. Alright gang, go out there and hustle and bustle. If you like these videos, please like, please comment, please share. If you really love these videos, if you really feel like I am adding value to you by allowing you to download my trade secrets all the years of my failure etc. in to you, please join the DOJO club. It’s only $500 for the whole year, you get paperwork level 1 you also get three hours of one on one coaching with me and I know I can change your life if you’ve already sold yourself on changing your life.

real estate investing coach

Let me say that again: I know I can change your life if you’ve already sold yourself on changing your life. I can’t create it for you, I can’t make you workout, but I can really push you if you want to work out. This is Mike with My RealEstate DOJO. Gang, go make it happen and don’t take ‘no’ for an answer and have a great night.


Leave a comment

Please note, comments must be approved before they are published