REAL ESTATE OPTION AGREEMENT
How to make a real estate option contract.
Buying, selling and leasing real estate can be one of the most profitable business decisions you can make. It can also be disastrous if you don’t know what you are doing. Many investors use real estate options when they decide to buy or sell a property. Why? Because unlike standard real estate transactions, an option allows a potential buyer to purchase the property almost unilaterally.
An Option to Buy Real Estate is essentially a delayed purchase, where the purchaser is granted the right to buy the property at a later time. If you are considering using real estate options, this is what you need to know:
- WHAT IS AN OPTION? Unlike standard contracts where the buyer and seller agree to transfer the property on completion, an options contract allows the buyer to purchase the property at a later date. Options are usually time limited, and price specific. This means that you have the option to buy the property within a certain time period at a stated price.
- ARE THERE DIFFERENT KINDS OF OPTIONS? Yes. The most common Real Estate Options Agreement cover two situations: pure option to buy, or lease with an option to buy. Leasing a property with the option to buy it is by far the most commonly met real estate option, and is essentially like renting a flat but being allowed to buy it if you wish. A’pure’ option grants the option holder the right to buy the property in a particular time period without having to lease it.
- DO I HAVE TO PUT MONEY DOWN? Usually, but it depends. A Real Estate Option Agreement usually involves the potential buyer offering some consideration (money) in return for the option. Depending on the terms of the agreement, you may be entitled to the option only on certain conditions or a certain amount of payment.
- CAN THE SELLER LET SOMEONE ELSE BUY A PROPERTY IF I HAVE AN OPTION ON IT? Not usually. One of the more powerful terms of a Real Estate Option Agreement includes the right for the option holder to stop any other transaction on the property. For example, if you hold an option to buy a property and the current owner decides to sell to another party, you can often stop the sale or at the least receive damages for the sale.
- CAN I TRANSFER MY OPTION TO SOMEONE ELSE? Sometimes you can. A Real Estate Option Agreement often allows for the option holder to transfer that interest to another party. What this means, is that you can sell your option to someone else just like it was any other property. Of course, the Real Estate Option Agreement must allow for this.
The use of Real Estate Options Agreements can be powerful tools for both investors and sellers. All parties involved need to be sure they have drafted suitable agreements that will satisfy all required statutes and laws. Everyone using Real Estate Options Agreements need to be sure of their positions, and the only way to do that is to make your contracts as precise and easy to read as you can.
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