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National curriculum lesson 86 · Contracts

Options, Rights of First Refusal, and Related Rights

An option gives the optionee the right, but not the obligation, to buy or lease on stated terms within a stated time. The optionor must keep the offer available according to the option agreement. A right of first refusal becomes exercisable when the owner decides to accept an outside transaction, while a right of first offer requires the owner to approach the holder first under its terms.

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Last reviewed August 2, 2026. Editorial standards.

What is the exam-ready answer?

An option gives the optionee the right, but not the obligation, to buy or lease on stated terms within a stated time. The optionor must keep the offer available according to the option agreement. A right of first refusal becomes exercisable when the owner decides to accept an outside transaction, while a right of first offer requires the owner to approach the holder first under its terms.
Official syllabus mapping for Options, Rights of First Refusal, and Related Rights
Roadmap lesson86 of 500
Official syllabus topicOptions, Rights of First Refusal, and Related Rights
Official PSI areaContracts
Published area weight19% of the 100-question national portion
Exam portionNational salesperson portion
Source editionPSI Georgia Candidate Information Bulletin dated July 1, 2026
Last verifiedAugust 2, 2026

The Rule

PSI publishes the weight for the complete content area, not a fixed question count for this lesson. Learn the rule well enough to apply it when PSI changes names, numbers, or parties in a new scenario.

Complete lesson

Read each concept as part of one decision system. The exam often gives one accurate statement and three statements that belong to a nearby concept.

Option structure

An enforceable option needs sufficiently definite terms and consideration or another legal basis. Before exercise, the optionee can choose whether to create the underlying purchase contract.

Exercise

The holder must exercise exactly as the option requires, including time, notice, delivery, and payment conditions. Late or altered exercise can fail.

Right of first refusal

The right generally allows the holder to match or accept specified terms when the owner elects to transact with a third party.

Right of first offer

The owner must offer the opportunity to the holder before marketing or accepting from others, according to the negotiated process.

Decision rule

Ask whether fixed terms are open now, an outside offer has triggered a matching right, or the owner must negotiate with the holder first.

Georgia-specific distinction

Georgia writing, recording, duration, and contract rules can affect these interests. Licensees should use appropriate forms and obtain legal drafting for custom option or preemptive-right provisions.

Worked example

Scenario. An owner grants a buyer the right for 60 days to purchase at $300,000, and the buyer is free not to exercise.

Reason it through. The owner is bound to keep the stated opportunity open while the buyer retains a choice.

Answer. This is an option.

Common exam traps

  • Calling an option a completed sale
  • Ignoring consideration and form
  • Confusing first refusal with fixed-price option
  • Exercising after expiration

Original practice questions with detailed explanations

These questions were written for instruction and mapped to the current outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.

Question 1

Who is not obligated to purchase under an unexercised option?

  1. A. Optionee
  2. B. Optionor
  3. C. Seller's lender
  4. D. County
Show answer and explanation →

Answer: A. Optionee

The optionee holds a right to choose rather than a present duty to buy.

Question 2

What commonly triggers a right of first refusal?

  1. A. Owner's decision to proceed with an outside transaction
  2. B. Any appraisal
  3. C. Loan application
  4. D. Property-tax bill
Show answer and explanation →

Answer: A. Owner's decision to proceed with an outside transaction

The right becomes relevant when the owner is prepared to transact on terms the holder may match or accept.

Question 3

Must option exercise follow the option terms?

  1. A. Yes
  2. B. No
  3. C. Only if financed
  4. D. Only for commercial property
Show answer and explanation →

Answer: A. Yes

Time and manner of exercise are central to creating the underlying contract.

Mastery tracking

Mark this lesson mastered only when every statement is true.

  • State the direct answer and decision rule without notes.
  • Explain every core concept in plain English.
  • Solve the worked example after changing one important fact.
  • Identify the Georgia distinction before reading answer choices.
  • Answer all three questions correctly and reject every distractor.
  • Repeat the topic in mixed practice on a later day.

Recommended next lesson

Continue with Purchase Agreements and Addenda. Continue to roadmap lesson 87 and build on this decision rule.

Return to the Contracts hub to see every official branch and the complete lesson sequence for this content area.

Options, Rights of First Refusal, and Related Rights questions

Facts checked against the current PSI Candidate Information Bulletin and GREC sources. Last reviewed August 2, 2026. Editorial standards.

Is Options, Rights of First Refusal, and Related Rights on the Georgia real estate exam?

Yes. It belongs to PSI's Contracts content area, which is 19% of the 100-question national portion. PSI publishes content-area weights, not a guaranteed question count for this individual lesson.

What is the main rule for Options, Rights of First Refusal, and Related Rights?

Ask whether fixed terms are open now, an outside offer has triggered a matching right, or the owner must negotiate with the holder first.

What Georgia-specific distinction should I remember?

Georgia writing, recording, duration, and contract rules can affect these interests. Licensees should use appropriate forms and obtain legal drafting for custom option or preemptive-right provisions.

How do I know I have mastered this lesson?

Explain the rule without notes, solve the worked example again with changed facts, answer all original questions correctly, explain every distractor, and repeat mixed practice on a later day.