What is an "option contract" in real estate?

An option contract in real estate is an agreement that grants the buyer the right, but not the obligation, to purchase a property at a predetermined price within a specified timeframe. This type of contract provides the buyer with flexibility, as they can choose not to proceed with the purchase if it does not align with their plans or market conditions. The seller is typically compensated for granting this option, often with an upfront fee, which secures the buyer's exclusive right to make the purchase decision during the agreed-upon time period.

This arrangement is beneficial for buyers who want to control a property without making an immediate commitment to buy, allowing them to evaluate the property or market conditions more thoroughly before deciding on the purchase. It also provides sellers with potential financial security, knowing that a buyer has expressed interest in the property.