June 30, 2005

Commercial Financing and Option Agreements

When an Option Expires, the Party is Over

Suppose you are a commercial mortgage broker. You are working on a commercial mortgage loan for a guy who has an option to buy a commercial property. You must not let that option expire by even one minute!

The drop-dead-date in an option agreement to purchase commercial property is just that - if your commercial property buyer does not close by the time prescribed in the agreement, the optionee (your buyer) is dead. The seller does not have to sell!

Suppose your commercial borrower has been leasing an office building for ten years. The lease contains an option to buy the property for $600,000. Over the years, partly because your commercial borrower put $200,000 in renovations into the property, the value of the commercial property has increased to $1 million. Remember, the optionor is not an idiot. He really-really doesn't want to sell his $1 million building for just $600,000.

Further suppose the commercial borrower comes to you for a commercial mortgage loan with just 35 days to run on his option agreement. You and he have a BIG problem. If your commercial mortgage loan does not close within 34 days, 23 hours, and 60 minutes - your commercial borrower is toast! The commercial property owner has every right to refuse to sell that $1 million property for $600,000.

Option dates are DROP DEAD dates. Do not miss them!

You can find hundreds of commercial property lenders on C-Loans.com.