ContractsCounsel Logo
Home Types of Contracts Option to Purchase Agreement

Jump to Section

ContractsCounsel has assisted 256 clients with option to purchase agreements and maintains a network of 158 real estate lawyers available daily. These lawyers collectively have 29 reviews to help you choose the best lawyer for your needs.

An option to purchase agreement is a legal contract that grants a party the right to buy a property or asset at a specified price within a specified timeframe. The agreement will provide both buyer and seller flexibility, allowing each to conduct further due diligence, secure financing, or assess market conditions before committing to the purchase. Understanding the importance of options to purchase agreements in real estate transactions will help both buyer and seller. In this blog, we will explore the complexity of the options, defining their key components, advantages, and downfalls.

Essential Elements of an Option to Purchase Agreement

The following essential elements should be included in an option to purchase agreement.

  • Option Fee: The non-refundable fee is typically paid by the buyer to the seller in the option, which is free from the purchase price and given for granting the exclusive right as consideration.
  • Exercise Period: It is the duration during which the buyer has the right to exercise the option, which must be specified in the agreement.
  • Purchase Price and Terms: The purchase price and any additional contingencies and closing dates must be outlined in the agreement.
  • Option Consideration: In some cases, the buyer might be required to provide additional consideration in the form of an inflated purchase price or additional charges to exercise the option.

Benefits of an Option to Purchase Agreement

Various real estate transactions need the option to purchase agreement, an important resource for purchasers and sellers. This contract gives only the buyer the right to acquire the property within the timeframe and at the price stated, but not the duty to do so. There are several important reasons why an option to purchase agreement is necessary, such as

For the Buyers

  • Providing Flexibility: The following agreement allows the buyer to buy the goods without any immediate commitment to purchase. Conduction of inspection, performing due diligence, and assessing the property’s suitability before finalizing the deal is allowed by the agreement. If the buyer finds a more affordable property or any unexpected crisis, they can terminate the agreement. The agreement is non-refundable, and the consideration fee is the bare minimum.
  • Fastening the Purchase Price: The buyer can negotiate the purchase price, upfronting it, and lock it in for the period to protect themselves from the potential price increment.
  • Giving Time for Review: The buyer is given the optimum time to inspect and investigate the asset before buying it. This allows them to inspect any issue related to the property and make any negotiations if needed.
  • Researching Market Timing: The buyer can use the option period to investigate the scope and capacity of the market to make a well-informed decision about buying a property/goods. Exercising the option can be advantageous if the market rises in response to expectations.
  • Facilitating Price Protection: Buyers can protect themselves against future price hikes by locking in a purchase price. This can be especially advantageous in a growing real estate market.

For the Sellers

  • Ensuring Income Generation: They have the option of paying the consideration fee immediately if the property is not sold.
  • Alleviating Peril: Receiving an option fee can benefit the seller by compensating for temporarily keeping products off the market. Over and above that, if the purchaser is unwilling to exercise the option given, the seller will retain the goods and option charges.
  • Granting Market Exposure: The seller can continue marketing the asset, even if the property agreement is done with a buyer.
  • Facilitating Reliability: The property will not be sold to another party during the specified option time. The option to purchase agreement provides this assurance and an optimum period to make finances and arrangements according to the necessity.
Meet some lawyers on our platform

Ryenne S.

670 projects on CC
CC verified
View Profile

Forest H.

239 projects on CC
CC verified
View Profile

Sarah S.

35 projects on CC
CC verified
View Profile

Umar F.

3 projects on CC
CC verified
View Profile

Factors When Drafting an Option to Purchase Agreement

The following are the vital factors necessary to consider while drafting an option to purchase agreement:

  • Granting a Timeframe: The option agreement grants the buyer an exclusive right to purchase the property within a specified timeframe. During this period, the seller is legally bound not to sell the property to any other party.
  • Maintaining Pre-Determined Price: The market fluctuation should not affect the predetermined price of the property to ensure that the agreement should remain intact on previous considerations.
  • Defining Clear Terms: It is essential and mandatory for the seller and buyer both to have clear, detailed, well-drafted options to purchase an agreement that thoroughly outlines and specifies each party's responsibilities and rights.
  • Seeking Expert Advice: Consult a real estate lawyer to ensure all necessary provisions are complied with. The careful explanation of the duration of the option period ensures sufficient time for the investigation of the property. It should be long enough to accommodate inspection, appraisal, and negotiation.
  • Addressing Termination Clauses: The conditions under which the option of termination and extension should be addressed appropriately in the agreement, as should difficulties such as the failure to get financing and unresolved investigation.
  • Providing Advantages in Real Estate Transactions: The option purchase agreement provides an advantageous framework for buyers and sellers in real estate transactions. It offers flexibility, price protection, and time for due diligence to buyers while generating income and security for sellers. Both parties should carefully consider and negotiate the terms of the agreement to protect their interests. They can confidently navigate the real estate market and achieve a successful transaction.
  • Considering Option Period Expiry: The agreement will be considered null and void if the purchaser malfunctions to exercise the option within the pre-decided time limit, and the buyer will lose its privileges. Sellers should be aware of the timeframe of the option limit to avoid any unnecessary delay in the purchase.
  • Ensuring Financial Consideration: Buyers must confirm their financial ability to execute the option, and the entire goods must be purchased within the specified time frame. Before entering the market, the buyer's financial stability must be evaluated under an option to purchase agreement.

Key Terms for the Option to Purchase Agreement

  • Option Price: The predetermined cost at which the option holder may buy the asset or property.
  • Option Period: The time frame the option holder may exercise their right to do so.
  • Exercise Notice: The written notification of an option exercise sent by the option holder to the seller.
  • Termination: The conditions under which any party may terminate the option agreement.
  • Purchase Agreement: The terms and conditions will be in effect if the option holder decides to continue purchasing after exercising the option.
  • Closing: The procedure and schedule for concluding the deal, which includes the handing over of ownership and the payment of the purchase price.

Final Thoughts on the Option to Purchase Agreement

The option to purchase agreement is an essential and valuable tool in real estate transactions, providing flexibility and alleviating peril for buyers and sellers. The parties can make an informed decision, which will further help them make transactions more efficiently. However, it is mandatory to draft the agreement carefully in the presence of a legal litigator to avoid any unnecessary hustle between the parties by ensuring clear terms and conditions.

If you want free pricing proposals from vetted lawyers that are 60% less than typical law firms, click here to get started. By comparing multiple proposals for free, you can save the time and stress of finding a quality lawyer for your business needs.

ContractsCounsel is not a law firm, and this post should not be considered and does not contain legal advice. To ensure the information and advice in this post are correct, sufficient, and appropriate for your situation, please consult a licensed attorney. Also, using or accessing ContractsCounsel's site does not create an attorney-client relationship between you and ContractsCounsel.

Need help with an Option to Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,522 reviews

Meet some of our Option to Purchase Agreement Lawyers

Rene H. on ContractsCounsel
View Rene
5.0 (24)
Member Since:
February 6, 2023

Rene H.

Free Consultation
San Diego, CA
13 Yrs Experience
Licensed in CA
Northwestern University

I am an attorney licensed in both California and Mexico. I offer a unique blend of 14 years of legal expertise that bridges the gap between diverse legal landscapes. My background is enriched by significant roles as in-house counsel for global powerhouses such as Anheuser-Busch, Campari Group, and Grupo Lala, alongside contributions to Tier 1 law firms. I specialize in navigating the complexities of two pivotal areas: AI/Tech Innovation: With a profound grasp of both cutting-edge transformer models and foundational machine learning technologies, I am your go-to advisor for integrating these advancements into your business. Whether it's B2B or B2C applications, I ensure that your company harnesses the power of AI in a manner that's not only enterprise-friendly but also fully compliant with regulatory standards. Cross-Border Excellence: My expertise extends beyond borders, with over a decade of experience facilitating cross-border operations for companies in more than 20 countries. I am particularly adept at enhancing US-Mexico operations, ensuring seamless and efficient business transactions across these territories.

George L. on ContractsCounsel
View George
5.0 (6)
Member Since:
August 16, 2022

George L.

Free Consultation
Rock Hill, SC
5 Yrs Experience
Licensed in GA, SC
University of Georgia School of Law

I am a corporate attorney with offices in Rock Hill, SC, and Lavonia, GA. My practice is focused on contracts, tax, and asset protection planning. I act as a fractional outside general counsel to over 20 businesses in 6 countries. When not practicing law, I can usually be found training my bird dogs.

Shawuki H. on ContractsCounsel
View Shawuki
Member Since:
November 3, 2023

Shawuki H.

Managing Attorney
Free Consultation
Bushnell, FL
4 Yrs Experience
Licensed in DC, FL
Western Michigan University Thomas M. Cooley Law School

hawuki attended SUNY Binghamton where he graduated with a Bachelor of Science in Marketing and Leadership & Consulting. Shawuki then went on to pursue his Juris Doctorate from Western Michigan University Thomas M. Cooley Law (WMU Cooley). During his time at WMU Cooley, Shawuki served as Justice of Phi Alpha Delta Law Fraternity, International, Vice President of Entertainment of Sports and Entertainment Law Society, and an Associate Editor of the Western Michigan University Thomas M. Cooley Journal of Practical and Clinical Law. At the conclusion of law school, Shawuki graduated with cum laude honors earning a spot on the Honor Roll and Dean's List. Professionally, Shawuki is an attorney/contract advisor and a serial entrepreneur. As the Managing Attorney of The Hilton Law Firm, PLLC, Shawuki has aided over a dozen startups and existing businesses with contractual, regulatory, administrative, and other legal matters. As a Canadian Football League (CFL) Contract Advisor, Shawuki has negotiated multiple player contracts, ensuring just compensation for his clients. Entrepreneurially, Shawuki is an owner of multiple businesses and has a wealth of business experience. Shawuki is a member of the Florida and District of Columbia Bar, Phi Alpha Delta Law Fraternity, International, Phi Delta Phi Legal Honor Society, and was recently named to the National Black Lawyers Top 40 under 40 list Florida.

Darren W. on ContractsCounsel
View Darren
Member Since:
November 5, 2023

Darren W.

Free Consultation
South Jordan, Utah
20 Yrs Experience
Licensed in AZ, CO, UT, WY
J. Reuben Clark, BYU

My main focus is estate planning and business transactions, but I have had many practice areas throughout my career, including criminal defense and prosecution, civil litigation from neighborhood squabbles to corporate contentions. I have also worked in bankruptcy, family law, collections, employment law, and personal injury. I stand ready to assist in any area to which I feel I can be of service, but will not try to fake it if I do not know the area of law I am being asked to serve in.

Dawn K. on ContractsCounsel
View Dawn
Member Since:
November 5, 2023

Dawn K.

Free Consultation
Los Angeles, CA
9 Yrs Experience
Licensed in CA
Concord Law School Kaplan University

Dawn K Kennedy has been licensed to practice law since 2015, but has been an entrepreneur since 2011. She uses her extensive project management and business background to support small and mid-sized businesses with contracts, negotiations, and other matters relating to the operation of a successful business venture.

Boris K. on ContractsCounsel
View Boris
Member Since:
November 7, 2023

Boris K.

Free Consultation
Newport Brach
11 Yrs Experience
Licensed in CA
Western Michigan Law

With over 10 years experience as a Real Estate Broker and an attorney, I can help you with all your residential real estate needs such as For sale by owner transactions and drafting grant deeds

Find the best lawyer for your project

Browse Lawyers Now

Quick, user friendly and one of the better ways I've come across to get ahold of lawyers willing to take new clients.

View Trustpilot Review

Need help with an Option to Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,522 reviews
Real Estate lawyers by top cities
See All Real Estate Lawyers
Option to Purchase Agreement lawyers by city
See All Option to Purchase Agreement Lawyers

ContractsCounsel User

Recent Project:
Hair Salon and Spa Purchase Agreement
Location: California
Turnaround: Over a week
Service: Contract Review
Doc Type: Purchase Agreement
Page Count: 5
Number of Bids: 4
Bid Range: $500 - $1,595

ContractsCounsel User

Recent Project:
Dental clinic purchase agreement
Location: Wisconsin
Turnaround: Over a week
Service: Drafting
Doc Type: Purchase Agreement
Number of Bids: 6
Bid Range: $900 - $2,500

Need help with an Option to Purchase Agreement?

Create a free project posting
Clients Rate Lawyers 4.9 Stars
based on 11,522 reviews

Want to speak to someone?

Get in touch below and we will schedule a time to connect!

Request a call

Find lawyers and attorneys by city