Exercise of Option Fee?

[Tony Miller]

Hi there...



I am working on my first RTO deal and I am using the RTO Worksheet that I found in the forms section to run some calculations.



Within the RTO worksheet and under the "Profit from Sale/Transfer" section, there is a line item called "Add: Exercise of Option Fee".



I have scoured Mark Loeffler's RTO book for an explanation of the term "Add: Exercise of Option Fee" but I can't seem to find it.



My interpretation of this is that the tenant/buyer is charged a certain amount to tell me that they will buy the home at the end of the lease term. Is this right? If yes, what calculation is used to determine how much the fee will be?



Any advice will be appreciated !



Thanks...Tony

 

[Sherilynn]

I believe his spreadsheet uses one month's lease payment as the exercise of option fee.



I am not a fan of how the fee is discussed in most of the contract templates that I have seen. It is pretty much glossed over and is easy for clients to miss. And no one wants a $2500 surprise when they are getting ready to buy a home. I plan to rewrite the section in my contract template but haven't done it yet.

 

[Tony Miller]

Thanks for the info Sherilynn. I just found the text in Mark's book - there is a short chapter (chapter 15) dedicated to the option fee so I am not sure how I missed it !



T