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Rainmaker
976,862
John Juarez
The Medford Real Estate Team - Fremont, CA
ePRO, SRES, GRI, PMN

An option contract is an agreement to buy a property under certain circumstances, such as at a future date, at a stated price. There is usually a non-refundable payment required to be paid to the seller to gain the seller's agreement. If the maker of the option does not exercise the option under the contract the up-front money is lost.

A rent-to-own situation involves an option.

I have never done one.

Feb 16, 2019 01:34 PM
Rainmaker
937,445
Peter Mohylsky. BRIX REALTY
Miramar Beach, Florida - Santa Rosa Beach, FL
BRIX REALTY -DESTIN

Not at all common in today’s market.

Feb 16, 2019 01:49 PM
Rainmaker
5,573,163
Barbara Todaro
RE/MAX Executive Realty - Retired - Franklin, MA
Previously Affiliated with The Todaro Team

I'm old school and the clean deal is my favorite...since I was usually a listing agent, my thoughts to the seller meant something....and I never wanted to roll the dice, so options were never exercised with my listings....clean deal with typical conditions....

Feb 16, 2019 01:43 PM
Rainmaker
4,335,709
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

I have never done an option contract in 25 years. In my opinion  they are worth maybe the paper they are printed on.

Feb 16, 2019 02:05 PM
Rainmaker
4,416,512
Wayne Martin
Wayne M Martin - Chicago, IL
Real Estate Broker - Retired

One buys an option, for upfront non-refundable consideration, to have an opportunity to decide later if he would like to proceed at a designated time or under designated conditions.

Not for the faint of heart and not advisable for a seller even in commercial where it is much more common. 

Not for typical residential. A wise residential agent would always advise a seller against it. 

Feb 16, 2019 01:54 PM
Rainmaker
584,628
Lynnea Miller
Bend Premier Real Estate - Bend, OR
Premier Real Estate Service in Central Oregon

Have reviewed several for residential purchases, and in all except one, which was between family members, the option has never been exercised. For those buyers looking for a rental in a growing market, these are great as they lock in the potential purchase price and can exercise this at a certain time. However, this is not a good choice for a seller.  I saw more of these written in a declining market where the seller was desperate for income from the property.  Again, the option never exercised.  The other question is how do we get paid as real estate agents working to get these in contract? I have always suggested a large down payment nonrefundable released to the seller and applied to the purchase price/rent out of which 1/2 commission is paid with the balance paid at the actual closing. Never got further than the discussion except the one time between family members.

Feb 16, 2019 03:08 PM
Rainmaker
924,040
Candice A. Donofrio
Next Wave RE Investments LLC Bullhead City AZ Commercial RE Broker - Fort Mohave, AZ
928-201-4BHC (4242) call/text

You have a property. I would like to buy your property. You're not interested in selling it right now. I'm giving you money. In exchange for that money, you agree that when and if you wish to sell your property I'm going to get the first shot at buying it. Meanwhile until we have negotiated a deal on your property, no one else can come in and buy it. That's what the option money is for.

Here's another scenario. I'm going to lease your property. I would like to tie up your property in the event that during the term of the lease I wish to purchase it. I may or may not give you money for that right now. But I'm going to include a clause in the lease that I have the option to purchase the property during the term of my lease should you decide to sell it.

Involvement? Several. I have one coming up this week in fact.

Feb 16, 2019 02:27 PM
Rainmaker
6,858,203
Roy Kelley
Realty Group Referrals - Gaithersburg, MD

Options are common land deals where zoning needs to be changed.

Feb 16, 2019 06:30 PM
Ambassador
4,419,370
Debe Maxwell, CRS
www.iCharlotteHomes.com | The Maxwell House Group | RE/MAX Executive | (704) 491-3310 - Charlotte, NC
The right Charlotte REALTOR!

I've done many of these for developers purchasing land - they provide consideration for each step of the Due Diligence process until the Contract is ultimately ratified (or terminated if they're not satisfied with their discovery).

Our NC Offer to Purchase & Contract includes what is called a Due Diligence fee which, in essence, is an Option Contract for residential resale property sale.

Feb 16, 2019 06:05 PM
Rainmaker
2,669,173
Richie Alan Naggar
people first...then business Ran Right Realty - Riverside, CA
agent & author

You get to tie up a piece of property for an amount of money and length of time in exchange for them not acting on it with anyone else. Example: I agree to pay you 100 to hold a property for 10 days at which time I will purchase or forfeit...Ask a Real Estate office to give you a copy of an option agreement

Feb 16, 2019 02:46 PM
Rainmaker
1,022,806
Doug Dawes
Keller Williams Realty Evolution - Topsfield, MA - Georgetown, MA
Your Personal Realtor®

Have never done one myself. You have been given the answer you are looking for

Feb 17, 2019 05:53 AM
Rainmaker
1,413,394
Ryan Huggins - Thousand Oaks, CA
https://HugginsHomes.com - Thousand Oaks, CA
Residential Real Estate and Investment Properties

They are very rarely used.  I've never seen one.

Feb 16, 2019 06:38 PM
Rainmaker
468,799
Dan Pittsenbarger
Keller Williams Western Realty - Bellingham, WA
Improving Conditions

I have done about 15 of them over the years. Other's have answered what an option is. There are many many uses for options. In a strong seller's market (like the past 3 or 4 years) it can get very expensive to make an option look appealing to a seller and option money is non-refundable.

The only scenario that I like options is tied with a lease and purchase and sale agreement (3 separate but tied together agreements) and the lease is to include the ability to sub lease.  This set up can work make one a lot of money under the correct market conditions.

Feb 16, 2019 03:36 PM
Rainmaker
5,764,585
Ron and Alexandra Seigel
Napa Consultants - Carpinteria, CA
Luxury Real Estate Branding, Marketing & Strategy

You have a great answer from John Juarez 

Feb 16, 2019 01:54 PM
Rainmaker
2,057,186
Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Good luck with your studies. 

Feb 17, 2019 03:16 PM
Rainmaker
530,446
Greg Cremia
Shore Realty of the Outer Banks - Nags Head, NC

An option is not a contract. A contract obligates both parties to perform. An option only obligates one party to perform.

Feb 17, 2019 05:16 AM
Rainmaker
4,433,809
Gita Bantwal
RE/MAX Centre Realtors - Warwick, PA
REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel

No.

Feb 17, 2019 03:26 AM
Ambassador
5,613,349
Bob Crane
Woodland Management Service / Woodland Real Estate, EXP - Stevens Point, WI
Forestland Experts! 715-204-9671

I have seen them, a few turn in regular offers that are set up this way with too many contingencies.

Feb 16, 2019 09:16 PM
Rainmaker
1,172,514
Sam Shueh
(408) 425-1601 - San Jose, CA
mba, cdpe, reopro, pe

In CA that rarely happens. I have seen it once prepared by a lawyer wanting to offer blah blah money after buyer find a developer. It stipulates an income of $10K for 4 years with 32 conditions. The owner wants X millon dollars for cash no if or buts. 

 

Feb 16, 2019 07:41 PM
Rainmaker
1,708,135
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

I do not do them.

Feb 16, 2019 03:56 PM
Rainmaker
5,164,641
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

Never seen one.

Feb 21, 2019 07:34 AM
Rainmaker
535,714
Rose Mary Justice
Synergy Realty Pros - Dandridge, TN
Synergy Realty Pros

I see you have some good answers here.  Just wanted to say Welcome to the world of Real Estate.

Feb 17, 2019 05:58 PM
Ambassador
3,119,664
Kathleen Daniels, Probate & Trust Specialist
KD Realty - 408.972.1822 - San Jose, CA
Probate Real Estate

That would be a great question to ask your real estate school instructor.  Why they send students here to ask these questions is beyond belief!  You deserve a refund. 

Feb 17, 2019 07:48 AM
Rainmaker
3,368,106
Scott Godzyk
Godzyk Real Estate Services - Manchester, NH
One of the Manchester NH's area Leading Agents

Most often a buyer ca have the first option to purchase a home contingent on them selling theirs. However sellers normally will only take this in a declining market where buyers are scarce. 

Feb 17, 2019 07:07 AM
Rainmaker
4,223,498
Richard Weeks
Dallas, TX
REALTOR®, Broker

It depends on what type option you are talkig about.

I have the option to purchase if I can get financing

I have the option to purhase if I am able to sell my house

I have the option to purhase if I am satisfied with the inspection report

I have the option to lease the house and at the end of the lease purhase the house.

etc etc etc etc etc

Feb 17, 2019 06:44 AM
Rainmaker
4,799,651
Gabe Sanders
Real Estate of Florida specializing in Martin County Residential Homes, Condos and Land Sales - Stuart, FL
Stuart Florida Real Estate

I know about them, but am not familiar.

Feb 17, 2019 06:25 AM