Question 1

How are options to purchase real estate used in Florida?

Accepted Answer

Florida uses: development options (developers option multiple parcels for a large development, exercising as zoning and financing are obtained), lease-to-own (residential tenants option to purchase rental properties), commercial lease options (commercial tenants option to purchase their leased space), and land banking (investors option undeveloped land in growth corridors, exercising as the market develops). Florida’s growing population and development activity make real estate options a common and valuable tool.

Question 2

What are the tax implications of real estate options in Florida?

Accepted Answer

Tax implications: option fee: not taxable to the seller until the option is exercised, lapses, or is sold. If exercised: the option fee is added to the purchase price (increasing the seller’s amount realized), the buyer’s basis includes the option fee, and the transaction is taxed as a sale of real property (capital gains if held for investment). If the option lapses: the option fee is ordinary income to the seller, the buyer has a capital loss. Documentary stamp tax: Florida documentary stamp tax (Section 201.01) applies to the conveyance of real property when the option is exercised (not when the option is granted).

Question 3

What protections should a Florida buyer have in a real estate option?

Accepted Answer

Buyer protections: recording (record a memorandum of the option to prevent third-party sales and protect against seller bankruptcy), due diligence period (the option should allow time for: title search, environmental assessment, survey, and zoning verification), financing contingency (the buyer may want the ability to cancel if financing is not obtained), and specific performance clause (expressly providing that specific performance is available as a remedy if the seller breaches; while specific performance is generally available for real property, an express provision strengthens the buyer’s position).

Option to Purchase: in Florida Real Estate

Options to Purchase Real Estate in Florida

Common Uses

Tax Implications

Buyer Protections

Related Terms

Barnes Walker Real Estate

Ready to Get Started?