When it comes to real estate contracts, there are several types of agreements that buyers and sellers can enter into. One of these is an active option contract. But what does that term mean, exactly?
Simply put, an active option contract gives the buyer the right, but not the obligation, to purchase a property at a predetermined price within a specific timeframe. During this time, the seller agrees not to sell the property to anyone else.
This type of contract is commonly used in situations where the buyer needs more time to secure financing, conduct inspections, or sell their existing home before they can commit to purchasing the property. By entering into an active option contract, the buyer is able to lock in the purchase price and secure their right to buy the property, while also giving them the flexibility to walk away if certain conditions aren`t met.
It`s important to note that an active option contract is not the same as a purchase agreement. In a purchase agreement, both the buyer and seller are obligated to follow through with the transaction. But with an option contract, only the buyer has the right to decide whether or not to proceed with the purchase.
Another important aspect of an active option contract is the option fee. This is a non-refundable fee paid by the buyer to the seller for the right to purchase the property at the agreed-upon price within the specified timeframe. This fee is typically a percentage of the purchase price and is negotiated between the buyer and seller.
In some cases, the option fee may be credited toward the purchase price if the buyer chooses to exercise their option to buy the property. However, if the buyer decides not to proceed with the purchase, they forfeit the option fee to the seller.
Overall, an active option contract can be a useful tool for both buyers and sellers in real estate transactions. It provides buyers with the flexibility to secure their right to purchase a property while giving them more time to finalize their plans. And for sellers, it can provide a steady source of income while they wait for the buyer to exercise their option to buy.