The real estate option contract

A real estate option contract is a document that gives a particular buyer an added advantage over the other potential buyers in the market. It is obvious that when a seller puts a property in the market, many buyers approach for buying the property. When a buyer gets the option contract, the seller loses the right to consider selling his property to any other buyer. This however does not obligate the buyer to buy the property.

A real estate option is a contract that is signed between the buyer and the seller. The buyer pays a predefined purchase price for M City Condos and buys the right to be able to buy the property. After the contract is signed, the seller loses the right of selling the property to any other buyer. The buyer can however stay for a defined period which is approximately six months to a year. He is in no way obligated to buy the property. The money given at the time of signing the contract is kept buy the seller even if the buyer chooses not to buy the property.

Buyer’s advantage

Real estate option has advantage for the buyer. If a buyer wants to buy land and plans to construct a house on it, he can sign an option contract with the seller. This ensures that the seller will not sell the land to anyone else. In the meanwhile the buyer can wait for the agreed upon time and arrange for the additional money required. The seller has to sell the property after the end of term on the agreed cost. Some option contracts however allow the property cost to be calculated at the end of the term according to different factors.

Investor’s advantage

If played wisely, the option contract can be of great advantage. An investor can see a developing project and can lock the land for sale of that project by signing an option contract. Now he can approach different people who are in development businesses telling them about the successful development projects in future on the said land. He will obviously quote the land price at a much higher rate than he has signed the contract for. This will promise the investor great profit without having investing his actual money.

Option contract is a safe way of securing the property for a buyer who is genuinely interested in buying the property.

Here is a very good video breaking down the option contract.