[WSBARP] Option to Purchase Real Estate

Thu May 17 10:50:43 PDT 2018

With an option, I prefer to attach the full purchase and sale agreement and include language in there to determine FMV at time of exercise of the option.

Simple FMV Clause:

The parties agree that the purchase price for the property shall be fair market value for the property at the time the option is exercised, to be determined by agreement.  If the parties cannot agree on fair market value, they shall each select one appraiser.  The appraisers shall agree upon a third appraiser and the fair market value shall be determined by a vote of at least two out of three of the appraisers.  Each party shall pay the cost of their own appraiser and one-half the cost of the third appraiser.

More complex FMV Clause

DETERMINATION OF FAIR MARKET VALUE

1.           Seller and Purchaser shall negotiate reasonably and in good faith to come to a mutually agreed upon Fair Market Value of the Option Property (the "Option Price") prior to 180 days before the end of the Option Period (the "Negotiating Period").  In the event Seller and Buyer cannot agree upon the Option Price within the Negotiating Period, then the determination of the Option Price shall be submitted to arbitration as set forth in Paragraph 2 below.

              2.           Within ten (10) days after expiration of the Negotiating Period, each party, at its own cost and by giving notice to the other party, shall appoint a real estate broker with at least ten (10) years full-time commercial real estate experience in commercial properties in the Tacoma-Seattle-Puyallup to set Option Price.  Each party shall advise the other in writing of the name and address of the advising party's broker within said ten (10) day period.  If a party does not appoint an broker within ten (10) days after the other party has given notice of the name of its broker, the single broker appointed shall be the sole broker and shall set the Option Price pursuant to the provisions of Paragraph 1 above.  If each party shall have so appointed a broker, the two brokers shall meet promptly and attempt to set the Option Price.  If the two brokers are unable to agree within thirty (30) days after the second broker has been appointed (the "Determination Period"), they shall attempt to select a third broker meeting the qualifications herein stated within ten (10) days after the last day Determination Period. If the two brokers are unable to agree on the third broker within such ten (10) day period, either of the parties to this Lease, by giving five (5) days' notice to the other party, may apply to the then presiding judge of the Superior Court of Pierce County for the selection of a third broker meeting the qualifications stated in this paragraph. In any event, the third broker, however selected, shall be a person who has not previously acted in any capacity for either party.

              3.           Within thirty (30) days after the selection of the third broker, a majority of the brokers shall set the Option Price.  If a majority of the brokers are unable to set the Option Price within the stipulated period of time, the three appraisals shall be added together and their total divided by three (3). The resulting quotient shall be the Option Price. If, however, the low determination and/or the high determination is/are more than ten percent (10%) lower and/or higher than the middle determination (the "Unacceptable Determination" or "Unacceptable Determinations"), then the Unacceptable Determination shall not be considered, and the two (2) other appraisals shall be added together and their total divided by two (2) and the resulting quotient shall be the Option Price.   If two (2) appraisals are considered Unacceptable Determinations, as set forth above, then the two Unacceptable Determinations shall be disregarded, and the middle determination shall be Option Price.

Andrew Hay
Hay & Swann PLLC
201 South 34th Street
Tacoma, WA  98418
Phone: (253) 272-2400
Fax:     (253) 267-8947
www.washingtonlaw.net<http://www.washingtonlaw.net/>

THIS IS A CONFIDENTIAL COMMUNICATION AND IS INTENDED FOR THE DESIGNATED RECIPIENT ONLY.  IF YOU HAVE RECEIVED THIS COMMUNICATION IN ERROR, PLEASE NOTIFY THE SENDER IMMEDIATELY AND DESTROY ALL COPIES

From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of John M. Riley III
Sent: Thursday, May 17, 2018 10:26 AM
To: WSBA Real Property Listserv
Subject: Re: [WSBARP] Option to Purchase Real Estate

Check the RPPT Deskbook.  Rights of First Refusal and Options are different. One is an absolute right to buy for a period of time on terms the parties determine at outset and one is a right to buy by matching a third party offer if the rfr grantor receives a third party PSA.

John M. Riley III
Attorney | Witherspoon * Kelley
JMR at witherspoonkelley.com<mailto:JMR at witherspoonkelley.com> | Attorney Profile <http://www.witherspoonkelley.com/john-riley-1> | vCard<http://www.witherspoonkelley.com/s/jmr.vcf>
[WK]

422 W. Riverside Ave, Ste 1100
Spokane, WA 99201
(509) 624-5265 (office)
(509) 458-2728 (fax)
witherspoonkelley.com

Confidentiality Notice: The information contained in this email and any accompanying attachment(s) is intended only for the use of the intended recipient and may be confidential and/or privileged. If any reader of this communication is not the intended recipient, unauthorized use, disclosure or copying is strictly prohibited, and may be unlawful. If you have received this communication in error, please immediately notify the sender by return email, and delete the original message and all copies from your system. Thank you.
From: wsbarp-bounces at lists.wsbarppt.com [mailto:wsbarp-bounces at lists.wsbarppt.com] On Behalf Of Eric Lanza
Sent: Wednesday, May 16, 2018 2:14 PM
To: wsbarp at lists.wsbarppt.com
Subject: [WSBARP] Option to Purchase Real Estate

Hello All,

I've done several Option Agreements in the past. Typically, I will prepare an Option Agreement with all of the required formalities, and attach a Purchase and Sale Agreement (with an agreed upon purchase price) as an exhibit. However, in this particular case, the parties haven't decided on a purchase price.

I want to draft the Option Agreement in such a way that it operates like a right of first refusal---whereby the Grantee of the option may purchase the property for "a price equal to any bonafide non-contingent 3rd party offer received by Grantor during the option term" (or something to that effect).

Is that language sufficiently definite to create an enforceable Option Agreement?

Would a Purchase and Sale Agreement still be a required exhibit if the Option Agreement contained the proposed language?

Has anyone prepared an Option Agreement similar to this?

Thanks,

Eric J. Lanza, J.D.
[Logo Color 946x243 pixels]
1800 Cooper Point RD SW NO. 8  |  Olympia, WA 98502
Telephone 360.352.1970  |  Fax 360.357.0844 |  www.jaglaw.net<http://www.jaglaw.net/>
eric at jaglaw.net<mailto:eric at jaglaw.net>

Nothing contained herein should be construed as legal advice.
The purpose of this email is to transmit a message or document.
Should you not be the intended recipient of this email message,
please reply advising of the mistake and then delete this message
from your computer. Should you have any questions,
please call the Sender at 360-352-1970.

-------------- next part --------------
An HTML attachment was scrubbed...
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20180517/7af5913e/attachment.html>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image002.png
Type: image/png
Size: 7508 bytes
Desc: image002.png
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20180517/7af5913e/image002.png>
-------------- next part --------------
A non-text attachment was scrubbed...
Name: image003.jpg
Type: image/jpeg
Size: 4745 bytes
Desc: image003.jpg
URL: <http://mailman.fsr.com/pipermail/wsbarp/attachments/20180517/7af5913e/image003.jpg>