How a Real Estate Option Transaction Works

Here is a sequential outline of the mechanics of a real estate option transaction:

Step 1: The optionee pays a real estate option fee to the optionor.

Step 2: The optionor grants the optionee the exclusive, unrestricted, and irrevocable right and option to purchase a property at a fixed purchase price during the option period by executing a real estate option agreement with the optionee.

Step 3: The optionee assigns or exercises his or her real estate option or lets it expire.

Step 4: Once exercised, a real estate option agreement turns into a bilateral agreement in which the optionee becomes the buyer and the optionor becomes the seller.

Step 5: The seller transfers the property's title to the buyer at the closing.

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