While some people purchase their dream property immediately upon seeing the first house, others may need more time to choose the right fit and prepare to go through with the transaction.
Needing more time is not a bad thing, and there are numerous reasons you may want to proceed carefully. A potential buyer may need the time to come up with the financing to purchase the property or consider several or more different properties.
When a buyer needs more time than they were planning to complete a purchase, they may want to ensure that a particular property is there when they are ready to make the purchase. In this situation, the buyer may request to use a real estate option agreement.
The option to purchase real estate is like a contract. Instead of buying the property right away, it lets the buyer to pay a certain sum of money instead of the whole price. In exchange, the buyer will get the exclusive right to buy that property. This contract sets a specific purchase price and definite period of time for the buyer to decide to pay the rest.
For a real estate option to be legally enforceable, it must be:
The exchange of money requirement means the purchaser of the option must pay the seller. That money can’t be refunded if the buyer backs out. The money was paid “in consideration” to own the exclusive option to purchase the property. In addition, it must be irrevocable so the seller cannot suddenly decide to terminate the option early, or sell the property to another person during the option period.
Yes, you can cancel the purchase agreement by paying an option fee. This will end the purchase contract between the seller and buyer, and put the real property back on the market for other home buyers.
Both parties have a specific time frame to cancel a real estate option contract. Usually, the buyer pays the option fee if they cancel the purchase option. Though, this can differ based on the terms of the option.
Buyers who want to purchase an option should negotiate with the seller. A seller can agree to an option for any price or any reason. There are no laws on the reasons or money involved in an option.
However, sellers are generally more likely to agree to a real estate option when:
Sellers can decide to create a real estate option if:
Discuss with a real estate agent or real estate attorney to understand if an option contract is the right idea for you.
It is common to see leases with the option to purchase, which afford financial certainty and flexibility for buyers and sellers. In this situation, a buyer will lease or rent the property while the option is being decided. Even while a buyer is leasing, the option must meet all of the requirements listed above. The seller might agree to less money in exchange for the option. This can be a good idea when the seller’s property and operating expenses are covered by the lease’s cost.
The lease period and the option period are typically the same. They will expire simultaneously so that the lessee has to:
When used correctly, real estate options are beneficial for both buyers and sellers in and can be advantageous to all parties in the right circumstances.
If you think you are being taken advantage of in a real estate transaction such as a real estate option or a lease with option to purchase, you should talk with an experience real estate attorney. If you do not fully understand the transaction, you could stand to lose a lot financially or lose out your dream property. Take the time to do your due diligence before you sign on the dotted line.
This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified real estate lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact a local real estate attorney to discuss your specific legal situation.