An Option to Purchase Real Property (also known as an Option Contract or Real Estate Option) is a legal agreement that gives the buyer the right, but not the obligation, to purchase a specific piece of real estate. The buyer pays a fee, known as an option fee, to the seller in exchange for the right to purchase the property at a predetermined price for a specified period of time. This type of agreement is often used in real estate transactions where the buyer is interested in a property but is not yet ready to commit to the purchase. There are two main types of Options to Purchase Real Property: 1. Call Option: This type of option gives the buyer the right to purchase the property at an agreed-upon price during the agreed-upon period of time. 2. Put Option: This type of option gives the seller the right to sell the property at an agreed-upon price during the agreed-upon period of time.
Option to Purchase Real Property
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FAQ
Define an option-to-buy. An option is an enforceable contract in which the optionor (seller) gives the optionee (buyer) the right to purchase the property before a determined time for a stated price and terms.
A real estate purchase option can be great for buyers. For example, if you want to buy a lot of land to build a new home, a purchase option can be used to keep the lot available for a certain amount of time, until you have funding. The landowner cannot sell the plot to anybody else during the term of the option.
The basics: What is an option contract in real estate? In the simplest terms, a real-estate option contract is a uniquely designed agreement that's strictly between the seller and the buyer. In this agreement, a seller offers an option to the buyer to purchase property at a fixed price within a limited time frame.
A real estate purchase option can be great for buyers. For example, if you want to buy a lot of land to build a new home, a purchase option can be used to keep the lot available for a certain amount of time, until you have funding. The landowner cannot sell the plot to anybody else during the term of the option.
Using an option contract allows a buyer to put a property ?on hold? for a certain period without the fear of losing it. This time allows the buyer to secure financing or conduct inspections while knowing the property is secure from other buyers.
Option contracts in real estate, also known as ?option to buy? contracts, purchase and sale agreements, or real estate purchase agreements, are legal contracts that grant a buyer or investor the right to purchase real estate from a seller. The seller typically offers an option to buy a property within a limited period.
An option-to-purchase contract must conspicuously state the duration of the option period. There is no correct or preferred unit of time and option periods can range from months to years. Typically, however, in the residential context, option periods range from one-to-five years.
Advantages of Real Estate Options For buyers, they lock in the price of the property while giving more time to procure more funds for purchase. For sellers, they can sell to an investor, which is a lower-risk way to sell land for property development.