an option definition in real estate
2. A common type of option agreement is found in the real estate market, where one party buys the right to have the first chance of purchasing a piece of property at a specific price at some point in the future. An option listing agreement is purchased for a consideration and entitle the optionee to exercise the right of purchase within the time specified. If the option is not exercised within the specified time period, than it will expire worthless. An option contract is a type of contract that protects an offeree from an offeror's ability to revoke the contract. Consideration for the option contract is still required as it is still a form of contract, cf. Zip Code: An option contact is one in which the seller extends and keeps open an offer for the sale of real estate. It’s for a certain or fixed amount of time, at a fixed or certain price, to a particular potential buyer. A bilateral contract where an optionor gives an option to the optionee for the right, but not the obligation, to purchase property within a certain period of time at a specified price. What’s bargained for and sold by the seller in an option contract is the right by the potential buyer, or “optionee,” to have the offer remain open during the period and on the terms specified in the contract. DEFINITION of 'Option Agreement'. 1. A signed agreement between an investor who is seeking to open an options account and his or her brokerage firm. This agreement is used to verify the investor's level of experience and to ensure that the investor clearly understands the various risks involved when trading options. 2. The seller must sell, and the buyer must buy, for the price or consideration and on the terms stated in the contract. A contract for the sale of land, on the other hand, binds the seller to sell and the purchaser to buy. In an option contract, only the seller is bound to the option. That is, the optionee doesn’t have to exercise the option and doesn’t have to buy, but the seller must keep the offer open. A contract that’s contingent or conditional on the happening of a certain event is not an option contract. An active option contract means a home seller has accepted an offer to sell their home but the contract is in the option period. Introduction [edit]. An option is the right to convey a piece of property. The person granting the option is called the optionor (or more usually, the grantor) and the person who has the benefit of the option is called the optionee (or more usually, the beneficiary). Options characteristically exist in one of two forms:
An option contact is one in which the seller extends and keeps open an offer for the sale of real estate.