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Complete glossary lessonNational exam concept

Option contract

An option contract gives the optionee the right, but not the obligation, to buy or lease property on stated terms within a stated time, in exchange for consideration supporting that promise.

Official area

Contracts

Knowledge cluster

Contract formation

Learning sequence

Define, distinguish, apply, retrieve

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Exam purpose

Recognize the rule, then reject the nearest look-alike.

Georgia lens

Apply the state distinction only when the facts call for it.

Connected terms

Connected to 4 terms and one official content area.

What does Option contract mean in real estate?

An option contract gives the optionee the right, but not the obligation, to buy or lease property on stated terms within a stated time, in exchange for consideration supporting that promise.

How is Option contract different from the closest exam answer?

Before exercise, the optionor is bound to keep the opportunity open while the optionee is not bound to purchase. A bilateral purchase contract binds both sides to promises.

What is the Georgia-specific rule?

Georgia contract principles and the statute of frauds apply to real estate options. The written terms should identify the property, option period, consideration, and exercise method.

Worked exam example

Scenario

An owner accepts $2,000 to keep a $250,000 purchase opportunity open for 30 days. The prospective buyer may exercise on time or let it expire.

Decision rule

Before exercise, the optionor is bound to keep the opportunity open while the optionee is not bound to purchase. A bilateral purchase contract binds both sides to promises.

What is the most common exam trap?

Trap correction

Option consideration and earnest money serve different functions. Do not assume an unexercised option is already a purchase contract.

Memory cue: Option consideration and earnest money serve different functions.

Original exam check

Apply the definition

Which statement correctly explains Option contract?

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Related terms to learn next

Unilateral contract

A unilateral contract is an offer of a promise that is accepted by completing the requested performance rather than by making a return promise.

Bilateral contract

A bilateral contract is formed by an exchange of promises, with each party becoming both a promisor and a promisee.

Right of first refusal

A right of first refusal gives its holder the opportunity to match or accept terms the owner is prepared to take from another buyer before the owner sells to that third party.

Contingency

A contingency is a contract condition that makes a party's duty, right to terminate, or obligation to proceed depend on a stated event, standard, deadline, or approval.

Recommended next complete lesson

Continue with Contracts complete lesson. It places this term inside the full rule, worked examples, exam traps, and mixed practice required for mastery.
Previous termSecondary mortgage marketNext term Statute of Frauds

Option contract quick answers

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Editorial standards.

What is Option contract?

An option contract gives the optionee the right, but not the obligation, to buy or lease property on stated terms within a stated time, in exchange for consideration supporting that promise.

What is Option contract commonly confused with?

Before exercise, the optionor is bound to keep the opportunity open while the optionee is not bound to purchase. A bilateral purchase contract binds both sides to promises.

How does Georgia treat Option contract?

Georgia contract principles and the statute of frauds apply to real estate options. The written terms should identify the property, option period, consideration, and exercise method.