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The option agreement did not require the Sopers to buy the
Blue Lake residence. The Sopers could exercise the option by
notifying petitioners in writing at any time before June 8, 1991,
the end of the lease term. Petitioners and the Sopers intended
that title to the Blue Lake property would be held in escrow
until the Sopers exercised the option, and that the escrow would
close before July 8, 1991.
The Sopers made a security deposit of $1,250 when they
rented the Blue Lake property. Under the option agreement,
petitioners credited that amount to the purchase price of the
property. As of October 30, 1989, the Sopers had paid to
petitioners $11,750 ($10,000 under the option agreement, $1,250
in security deposit, and $500 earnest money), which petitioners
later applied to the purchase price of the Blue Lake property.
If the Sopers did not buy the Blue Lake residence, $10,500 was
nonrefundable; this amount is 12.35 percent of the total price.
In addition, some or all of the security deposit was refundable
when and if the Sopers vacated the property.
On June 22, 1991, the Sopers and petitioners amended the
option agreement to delete the provision which required the
Sopers' mortgage payments to be applied to the purchase price,
and to delete the provision which required the amount of interest
that would accrue on the principal amount of $20,000 to be
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