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Quick Facts — Real Estate Option Agreement Lawyers

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

 

EXHIBIT 10.12
REAL ESTATE OPTION AGREEMENT
          THIS REAL ESTATE OPTION AGREEMENT (“Agreement”) is made this 29th day of August, 2005, by and between Hankinson Community Development Corporation, Incorporated, a corporation (hereinafter referred to as “Optionor”) and Gold Energy, LLC, a Minnesota limited liability company (hereinafter referred to as “Optionee”).
          WITNESSETH:
          WHEREAS, Optionor is the owner of real estate described below and desires to exchange cash said real property under defined terms; and Optionee desires to acquire said Property from Optionor in accordance with the terms and conditions set forth hereafter.
          NOW THEREFORE, IN CONSIDERATION of the covenants and promises contained hereafter, it is agreed:
          PREMISES Optionor hereby grants to Optionee the exclusive option to purchase real estate located in Richland County, North Dakota, (the “Property”) more specifically described as follows:
    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.
     CONSIDERATION The price (the “Purchase Price”) for the Property shall be $160,000.00, payable by Optionee as herein provided. As consideration for the option, Optionee agrees to pay to Optionor at the time of the execution of this Agreement the sum of $2,500.00 (the “Option Consideration”) with said payment to be credited to the Purchase Price at closing. The remaining balance of the Purchase Price ($157,500.00) shall be paid in cash and at closing.
     TERM This Agreement shall commence on the date of the execution of this Agreement and continue to the 29th day of August, 2006 at 5:00 o’clock P.M. Optionee shall have the right to extend this option for an additional six (6) months upon payment to Optionor of the sum of $1,250.00, which shall become a part of the Option Consideration. If not exercised timely, this Agreement shall expire automatically and be null and void and the Option Consideration shall be forfeited to the Optionor. If extended, the additional $1,250.00 shall be credited against the Purchase Price at closing.

 

 

     NOTICE OF EXERCISE OF OPTION Optionee shall at any time during the option term notify Optionor by registered mail, Federal Express delivery or hand delivery of its written demand that Optionee intends to complete the purchase of the Property. The conveyance and closing for the Property defined above shall thereupon be completed within 90 days thereafter in accordance with the terms and conditions set forth hereafter.
     TERMS In the event this Option is exercised, Optionor agrees to sell and Optionee agrees to purchase the Property, with improvements thereon, if any, under the following terms and conditions:
  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.
          SURVIVAL All of the terms, representations, warranties and disclaimers contained in this Agreement are continuing and shall survive the closing.

 

 

          RECORDING OF OPTION The parties hereto agree that this Option Agreement may be recorded with the Richland County Recorder’s office.
          NOTICES Any notice, demand or other document which either party is required or may desire to give or deliver to or make upon the other party shall be given in writing and served either personally or given by prepaid United States certified mail, return receipt requested, and addressed to the following addresses:
             
 
  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    
          1031 EXCHANGE: If requested by Optionor, Optionee will cooperate with the Optionor in conducting a §1031 like-kind exchange, the cost of which will be paid by the Optionor.
          TIME: Time is of the essence as to the performance of all of the terms and conditions of this Agreement.

 

 

          IN WITNESS WHEREOF, said parties hereto subscribe their names.
     
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     )          
          On this 7th day of    October   , 2005, before me personally appeared David Paulson, known to me to be the President of Hankinson Development Corporation, Incorporated, a North Dakota corporation, the corporation that is described in and that executed the within and foregoing document, and acknowledged to me that he executed the same on behalf of said corporation.
                 
 
                        /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
    )          
          On this 5th day of     October     , 2005, before me personally appeared Daniel O. Skolness      known to me to be the      Vice President  of Gold Energy, LLC, a Minnesota limited liability company, the limited liability company.

 

 

that said described in and that executed the within and foregoing document, and acknowledged to me that he executed the same on behalf of said limited liability company.
     
 
  /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.

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Real Estate

Real Estate Option Agreement

New York

Asked on Nov 28, 2024

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.

Answered Dec 2, 2024

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.

Read 1 attorney answer>

Real Estate

Real Estate Option Agreement

Georgia

Asked on Feb 26, 2025

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.

Answered Apr 8, 2025

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

Read 1 attorney answer>

Real Estate

Real Estate Option Agreement

Washington

Asked on Aug 27, 2025

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.

Answered Sep 2, 2025

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.

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