Real Estate Option Agreement: Definition, Terms, Example
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What is a Real Estate Option Agreement?
A real estate option agreement is a legal agreement between a seller and a buyer or investor that allows the buyer or investor the right to purchase a property. An option agreement usually gives the buyer or investor a specific timeframe to make their decision whether or not to purchase the property.
Also known as a purchase option agreement, this document allows purchasers to reserve the right to make that decision at a later date when conditions may have changed. Having a real estate option agreement does not force a buyer or investor to purchase a property, but simply gives them the option to at a later date.
Common Sections in Real Estate Option Agreements
Below is a list of common sections included in Real Estate Option Agreements. These sections are linked to the below sample agreement for you to explore.
Real Estate Option Agreement Sample
| That part of the Southwest Quarter (SW 1/4) of Section Eighteen (18), Township One Hundred Thirty (130) North, Range Forty-nine (49) West of the Fifth Principal Meridian which lies north of the railroad right of way, which tract consists of roughly 80 acres, more or less. |
| 1. | Right to Enter Property and Due Diligence. Optionor agrees that Optionee and/or third-parties directed by Optionee, shall have the right to enter upon the Property at any time from the date of this agreement until closing in order to conduct due diligence investigations upon the Property by giving Optionor one (1) day advanced written or verbal notice. Any due diligence costs and work performed, including, but not limited to, surveys and environmental studies conducted, shall be at the sole cost of the Optionee. | ||
| 2. | Crop Damage. In the event that Optionee’s due diligence and/or conveyance of the Property to Optionee shall occur after Optionor, or its tenants and/or agents, plants crops, but before harvest of those crops, the parties hereto mutually agree that Optionor shall have the right, upon notice to the Optionee and at the Optionee’s convenience, to harvest any crops not destroyed by the Optionee in the process of its due diligence and/or its construction of an ethanol plant and related improvements thereto. The Optionee shall have no duty to preserve any of such crops, and the Optionor accepts as liquidated damages (in lieu of any and all other damages) an amount equal to the most recent Richland County USDA proven yield for the commodity planted on the Property in the year of damage multiplied by the Richland County USDA four year average price for the commodity grown in the year of damage, multiplied by the number of acres, or fractional acres, of crop destroyed on the Property. If the parties cannot mutually agree upon the number of crop acres damaged, the number of such cop acres damaged shall be measured by an independent third-party as the parties hereto may mutually identify. | ||
| 3. | Termination Of Tenants. Regardless of when or if Optionee provides notice of the exercise of its option provided hereunder, in the event this option is exercised, Optionor agrees to provide timely notice to any tenant of the Property of the termination of such tenant’s tenancy. Such notice shall follow the form required for the termination of farm tenancies under the applicable lease terms involved and/or North Dakota Law. |
| 4. | Title Examination. No later than 20 days from delivery of notice of exercise of the option granted hereby, the Optionor shall furnish the Optionee a duly certified Abstract of Title to the Property, continued to a recent date, showing good and marketable title in the Optionor, free and clear of all liens and encumbrances, except as noted below. The Optionee shall have 15 days time to examine said abstract of title and within said period of time shall promptly notify the Optionor of all objections thereto in writing. If the title to the Property is unmarketable, the Optionor shall have a period of 90 days in which to correct the title and make it marketable. If the title to the Property cannot be made marketable within said period of time or such further time as may be granted by the Optionee, the Optionee shall be entitled to the return of the Option Consideration paid under this Agreement, but otherwise this Agreement shall be wholly null, void and unenforceable. | ||
| 5. | Title, Liens and Encumbrances. At closing, Optionor shall transfer title to Optionee by a Warranty Deed conveying good and marketable title to the Optionee. The sale and transfer by Warranty Deed shall be free of all liens and encumbrances except for the following: |
| A. | Building and zoning laws, ordinances, sate and federal regulations, provided they do not materially and adversely affect the use of the property; | ||
| B. | Utility, drainage and other easements of record which do not materially and adversely interfere with the use of the Property. |
| 6. | Taxes and Special Assessments. The Optionor agrees to pay all real estate taxes and assessments for special improvements levied or assessed for the year prior to closing. Real estate taxes, and assessments for special improvements for the year of closing shall be prorated between the Optionor and the Optionee and in the event the exact amount of the taxes and assessments for that year are not yet known, the amount to be prorated shall be based on the real estate taxes and assessments for special improvements for the previous year. Optionee agrees to pay the real estate taxes and assessments for special improvements for all subsequent years. | ||
| 7. | Closing and Possession. Possession is to be given immediately upon completion of closing. Closing shall occur after approval of title and PRIOR TO POSSESSION, but in no event later than 90 days from the date of the notice of exercise of the option, or as otherwise agreed upon by the parties. |
| 8. | Default. In the event either party has fulfilled all of its obligations hereunder and all conditions precedent and concurrent to closing for which it is responsible and the other party fails to fulfill its obligations hereunder and continues to fail and refuses to fulfill its obligations hereunder for more than 30 days after receipt of written notice of such default from the non-defaulting party, the non-defaulting party may either: in the case of the Optionee 1) terminate this Agreement, in which event it shall be entitled to retain of the Option Consideration and any other monies paid hereunder to Optionor, and such termination and Option Consideration shall be the sole remedy and damages available; or 2) pursue any legal and/or equitable remedy available to it; or in the case of the Optionor 1) terminate this Agreement, in which event it shall be entitled to retain the Option Consideration and any other monies paid hereunder by Optoinee to Optionor, and such termination and retainage shall be the sole remedy and damages available to the Optionee, or 2) pursue any legal and/or equitable remedy available to it. | ||
| 9. | Disclaimer — the Property is sold AS IS. Except for warranty of title, Optionor will give no warranty and will make no representations to Optionee of any kind. THERE ARE NO EXPRESS WARRANTIES AND OPTIONOR SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WARRANTIES OF HABITABILITY, IMPLIED WARRANTIES, IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. THE PROPERTY WILL BE SOLD AS IS, WITHOUT WARRANTY OF ANY KIND, WITH ALL FAULTS AND IN ITS PRESENT CONDITION. THE PROPERTY WILL ALSO BE SOLD WHERE IS AND NO WARRNATY OR REPENSTATIONS WITH RESPECT TO BOUDNARY LINES WILL BE MADE BY OPTIONOR. Optionee must satisfy Optionee that the Property is entirely within boundary lines expected. Optionee represents to the Optionor that Optionee takes the Property in its present condition with all its faults. Optionee has been or will be provided full and complete access to the Property and the full right to examine and test the same. Optionee is relying solely upon such access, investigation and Optionee’s testing and is not relying upon any representation or warranty of Optionor. |
| If to Optionor: | Hankinson Community Development Corporation | |||||
| Incorporated | ||||||
| c/o Robert Wurl | ||||||
| Lincoln State Bank | ||||||
| 302 Main Ave. S. | ||||||
| Hankinson, ND 58041 | ||||||
| With a copy to: | ||||||
| Fred Strege | ||||||
| Smith, Stregge & Fredricksen, Ltd. | ||||||
| Box 38 | ||||||
| Wahpeton, ND 58074 | ||||||
| If to Optionee: | Gold Energy, LLC | |||||
| c/o Michelle Swenson | ||||||
| 1183 6th Street South | ||||||
| Wahpeton, ND 58075 |
OPTIONOR:
|
OPTIONEE: | |
HANKINSON COMMUNITY DEVELOPMENT CORPORATION INCORPORATED |
GOLD ENERGY, LLC |
By:
|
/s/ David Paulson | By: | /s/ Daniel O. Skolness | |||||||
| David Paulson, President | Its [Handwritten: Vice President] | |||||||||
| STATE OF NORTH DAKOTA | ) | |||||||||
| )SS: | ||||||||||
| COUNTY OF RICHLAND | ) | |||||||||
| /s/ Lori J. Hubrig | ||||||||
| Notary Public | ||||||||
| My Commission Expires: 7-12-06 | ||||||||
| [Stamped: LORI J. HUBRIG | ||||||||
| Notary Public | ||||||||
| State of North Dakota | ||||||||
| My Commission Expires Aug. 29, 2010 | ||||||||
STATE OF
|
) | |||||||
| ) SS: | ||||||||
COUNTY OF
|
) | |||||||
| /s/ Fred Strege | ||
| Notary Public | ||
| My Commission Expires: | ||
| [Stamped: Fred Strege | ||
| Notary Public | ||
| State of North Dakota | ||
| My Commission Expires Sept. 30, 2007 |
Reference:
Security Exchange Commission - Edgar Database, EX-10.12 24 c00246exv10w12.htm REAL ESTATE OPTION AGREEMENT, Viewed October 4, 2021, View Source on SEC.
Who Helps With Real Estate Option Agreements?
Lawyers with backgrounds working on real estate option agreements work with clients to help. Do you need help with a real estate option agreement?
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Meet some of our Real Estate Option Agreement Lawyers
Joshua B.
Josh Bernstein has been serving real estate and corporate transactional clients since 2002. His experience is varied, and he enjoys working on and puzzling out novel and complex corporate and real estate matters. Josh’s experience includes, among other things, the following: representation of public companies in connection with SEC reporting and compliance work (proxies, 10-K’s; 10-Q’s; 8-K’s, etc.); representation of public and private company securities issuances (including private placements, and other similar offerings); assistance in structuring and drafting joint ventures, both for investors and operating partners, and including both real estate and corporate ventures; handling public and private company mergers and acquisitions; and asset sales and dispositions; assisting clients, big and small, with real estate acquisitions, sales and financings; managing large-scale and multi-state real estate portfolio acquisitions, dispositions and financings; complex condominium creation, structuring and governance work, including: commercial condominiums, use of condominiums as a land planning tool, wholesale condominium property acquisitions and dispositions, and rehabilitating failed or faulty condominium legal structures to make ready for sale; development of restrictive covenants and owners’ association documents for master-planned communities; compliance with federal statutes governing real estate sale and development (including, without limitation, the Interstate Land Sales Full Disclosure Act, the Housing for Older Persons Act, and the Americans with Disabilities Act); representation of real estate lenders, for both improved and unimproved property, and including numerous construction financings secured by real estate; assistance with commercial leasing; from both the landlord and tenant side, and including condominium leasing; training residential home and condominium sales staff for compliance with applicable local and federal law; and workouts of all kinds. When he’s not busy lawyering, Josh may be found watching 80’s commercials, flying a single-engine plane, playing poker, or trying to be a good dad.
"Josh has been extremely helpful sorting through issues with a tenant."
Jason H.
Jason has been providing legal insight and business expertise since 2001. He is admitted to both the Virginia Bar and the Texas State Bar, and also proud of his membership to the Fellowship of Ministers and Churches. Having served many people, companies and organizations with legal and business needs, his peers and clients know him to be a high-performing and skilled attorney who genuinely cares about his clients. In addition to being a trusted legal advisor, he is a keen business advisor for executive leadership and senior leadership teams on corporate legal and regulatory matters. His personal mission is to take a genuine interest in his clients, and serve as a primary resource to them.
"Wonderful attorney! He was extremely professional, answered all of my questions and was patient with my complicated legal situation. Don’t hesitate to hire him."
Rebecca R.
Experienced attorneyin leasing, NDA, family law, commercial real estate, immigration and employment . Well versed in internal and external policy document and manual creation.
"Quickly understood our requirements and created a customized doc to meet our needs with a fast turnaround... We'd definitely work with Rebecca again!"
Jeff G.
Jeff has 25 years of commercial transactional experience within numerous industries, including finance/banking, telecommunications/utilities, insurance, and software. He is a recognized authority on contracts, software licensing and negotiation. Jeff earned his Juris Doctorate from Valparaiso University School of Law and his Masters in Business Administration from North Carolina State University and is licensed to practice law in North Carolina and Indiana.
"Jeff G. handled everything very professionally. He was quick to respond and asked all the questions he needed in order to complete my project! Amazing service and highly recommend."
October 31, 2024
Patrick W.
Patrick is a seasoned attorney with over 11 years of experience in corporate law, commercial contracts, and regulatory compliance, with a specialization in emerging technologies such as AI and Web 3.0. Patrick works with commercial contract negotiations for technology startups, managing multi-million-dollar agreements, and offering comprehensive corporate governance services, including stock plan administration, cap table management, and day to day advising. One of Patrick’s career highlights includes his tenure at SharesPost Inc., a pioneering fintech startup, where he served as Senior Legal Counsel and later Interim General Counsel. In this role, Patrick led product legal risk management, negotiated SaaS and data processing agreements, and ensured compliance with SEC, FINRA, and DBO regulations. He played a pivotal role in the company's growth working closely with operations and sales, until such time teh company was acquired. In addition to his work at SharesPost, Patrick’s experience includes serving as Policy Counsel at Bird Global and General Counsel and Chief Compliance Officer for Planned Parenthood Northern California, where he oversaw a $60M revenue organization, directed legal strategy for EHR migration, and ensured compliance with state and federal privacy laws.
John B.
J. D. Bridges has worked both in-house and in firms and has seen countless commercial agreements and technology deals from every angle. J. D.’s worked as in-house counsel for high-growth, VC-backed startups, IT solutions providers and cybersecurity companies and also at an AmLaw Top 50 global firm, representing clients in a variety of industries and purchasers and creators of technology across the globe. He’s negotiated commercial contracts with some of the world’s largest financial services and pharmaceutical companies, as well as assisting startups from incorporation to exit. He’s also helped Fortune 100 companies protect themselves and their data when procuring technology from startups and legacy technology providers alike. J. D. brings a practical and growth-focused mindset to legal advice and excels in working with front-line sales organizations and sales leadership as well as internal counsel, business owners and procurement professionals. Whether a pre-seed AI startup, established manufacturer or a global IT procurement effort, J. D. can support you while concurrently growing and protecting your business.
November 13, 2024
Alyssa C.
Illinois-licensed attorney with 9 years of experience in public interest work utilizing advanced skills in contract & project management, compliance, investigation, risk management, & training. Proven record developing and managing partnerships to deliver exceptional results in government agencies, non-profits, law firms, and broad community networks leading to multi-million dollar recoveries, risk management, and execution of large-scale program initiatives. Skills include: 1. Project & Contract Management: 9 years in project & contract management tracking project and contract goals, stages, budgets, and deliverables to lead and support program and department initiatives. 2. Compliance, Investigation, & Risk Management: 9 years in law, policy, & programs conducting investigation, research, writing, analysis, and education in administrative agency and court matters relating to: compliance, financial regulation, contracts, employment, workforce development, healthcare, retirement assets, mental health, disability, taxes, immigration, civil rights, grants, benefits, social services, & criminal defense. 3. Training/Teaching: 4 years training co-workers & community partners; 3 years teaching in U.S. & Ecuador (7 total). 4. Technology: Microsoft Office (including Excel), Contract Express, DocuSign, SharePoint, Westlaw, Lexis Nexis, Concordance, GoldFynch, Clio, Smokeball, Qualtrics, Google Forms, Slack, Zoom, Teams, Webex, & Adobe. 5. Spanish: Advanced Spanish skills from 1 year of teaching, studying, & travel in Ecuador, Peru, & Mexico.
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Real Estate Option Agreement
Georgia
Can a Real Estate Option Agreement be terminated if the seller sells the property to a third party before the option period expires?
Can a Real Estate Option Agreement be terminated if the seller sells the property to a third party before the option period expires? I entered into a Real Estate Option Agreement with a seller, giving me the option to purchase their property within a specified time frame. However, before the option period expired, the seller sold the property to a third party. I am now unsure of my rights and whether I can enforce the option agreement or seek any remedies for the seller's breach of contract.
Jerome L.
Hi there, If you had a valid and enforceable Real Estate Option Agreement, the seller likely breached that agreement by selling the property to a third party before the option period expired. Here’s what you should know: Your Rights Under an Option Agreement: An Option Agreement is Legally Binding: Once you pay consideration for an option to purchase property within a specified time frame, the seller is legally obligated to keep that offer open. They cannot sell the property to someone else during that time without breaching the agreement. The Sale Does Not Automatically Terminate the Option: The seller's transfer to a third party does not cancel your rights under the option agreement. In fact, the third party may have taken the property subject to your option, especially if the agreement was recorded or the buyer had notice. You May Be Entitled to Legal Remedies: Your options may include: Specific Performance: Forcing the sale of the property to you if it is still possible. Monetary Damages: If specific performance is not available, you could pursue damages for breach of contract. Equitable Remedies: Depending on the circumstances, there may be claims for fraud, bad faith, or interference with contractual relations if the third party knew about your option. Recording the Option Agreement Strengthens Your Claim: If your option was recorded in the public land records, it puts all third parties on notice of your rights. Even if it wasn’t, the seller and potentially the third party may still be liable based on what they knew. I recommend speaking with an attorney as soon as possible to review your agreement, assess the timeline, and determine the best course of action based on your state’s laws. If you are in Georgia or need guidance on how to proceed, I would be glad to help. Best regards, Jerome Lucas Newell, Esq. Real Estate & Contracts Attorney
Real Estate
Real Estate Option Agreement
Washington
Can an option agreement for real estate be terminated if the option holder fails to exercise their right within the specified timeframe?
I have entered into a real estate option agreement with a potential buyer, where they have the right to purchase the property within a specified timeframe. However, the option holder has failed to exercise their right within the agreed-upon timeframe. I would like to know if I have the legal grounds to terminate the option agreement and explore other potential buyers for the property.
Merry K.
Based on what you’ve described, once the option period has expired without the buyer exercising their right to purchase, the option agreement is generally no longer enforceable and you are free to market the property to other buyers. To protect yourself, review the exact language of the option agreement to confirm whether it provides for automatic termination upon expiration, and consider sending the buyer a written notice—ideally by both regular and certified mail—confirming that the option has lapsed and that you are releasing the property for sale to others. Please be advised that I provided this information for educational purposes, and no attorney client relationship has been formed.
Real Estate
Real Estate Option Agreement
New York
Can a real estate option agreement be terminated if the property owner does not fulfill certain conditions within the specified time frame?
I am currently in the process of negotiating a real estate option agreement with a property owner, where I have the right to purchase the property within a certain time frame at a pre-determined price. However, the agreement includes certain conditions that the property owner must fulfill, such as obtaining certain permits or completing renovations, within a specified time period. If the property owner fails to meet these conditions within the given timeframe, can the option agreement be terminated, or do I still have the right to purchase the property at the agreed-upon price? I am seeking clarification on the legal implications of such a situation.
Damien B.
If your option agreement explicitly states that the property owner must meet certain conditions (e.g., obtaining permits or completing renovations) as a prerequisite for you exercising your option, their failure to meet these conditions could render the agreement void or allow you to terminate it. The agreement might include a "time is of the essence" clause, which makes meeting deadlines legally binding. If the property owner misses deadlines for required actions, you may have grounds to terminate the agreement. Carefully examine the terms, particularly sections related to contingencies, conditions, and remedies for non-compliance. Consult an attorney to assess your rights and obligations under the agreement and advise you on how to proceed. Feel free to reach out.
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ContractsCounsel User
rent to own contract
Location: Kentucky
Turnaround: Over a week
Service: Prepare & File
Doc Type: Real Estate Option Agreement
Number of Bids: 3
Bid Range: $450 - $750
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