A real estate option contract is an agreement by which one party grants the other the exclusive power and advantage to purchase a given property. This must be done within a specified period and under certain conditions, and may also be accompanied by the payment of a premium.

It must be said that the purchase option is not sufficiently regulated in the Civil Code, even though its registration aspect is recognized in the Mortgage Regulation.

Main elements:

  • The granting to the optant of the right to decide unilaterally on the realization of the purchase.
  • The determination of the object.
  • The indication of the price stipulated for future acquisition.
  • Moreover, the specification of a term for the exercise of the option.

In this way, the owner of a property grants a third party the right to opt for the purchase and sale of the property under certain conditions for a specified period. Thus, during this period, the faculties of sale of the property by the owner to a third party are annulled.

With these premises, it is a characteristic of the purchase option that the grantor compromises not to sell the property to anyone during the stipulated period. What the homeowner undertakes to do is to sell a sure thing to the optant. So, the seller undertakes to keep the thing available during the stipulated period.

The Different Advantages

A real estate option contract is perfect for a buyer when allowed to buy large quantities of empty land for construction, and thus securing the property until they have enough money to start building. This means that the owner of the land can not sell during the term of the option, and therefore, at the end of the term must sell the land at a price agreed with the buyer, he can not change prices after closing the contract.

Investors also can use a real estate option contract to secure and take advantage of high ROI with relatively low risk and within established regulations. An investor can secure a specific land which is known to have good returns in the future, then this is where the investor takes advantage, and instead of buying all the land and then selling it, buys the exclusive rights to the land through a contract option. 

In this way he can offer such land to other powerful investors at a much higher price than what he paid for the exclusive rights to the blocked purchase, so on when he accepts the highest offer, he sells the contract option keeping the difference of the money and making profits from the purchase of the exclusive rights.

The rental agreements are presented when a tenant wants to buy the property he has leased, these agreements are a little technical and complicated.  So, the advice of a qualified attorney is recommended. The leasing option allows the tenant to purchase the property after having been rented in a given period. The lease option contract will contain all the terms related to the tenant’s purchase of the property; monthly payments, additional premiums, absolutely everything, and if for some reason the tenant does not want to buy the property after signing the contract, he will automatically lose money on the lease option.

This is Why You Need a Real Estate Option Contract

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