What is the exam-ready answer?
| Official syllabus topic | Options, Rights of First Refusal, and Related Rights |
|---|---|
| Official PSI area | Contracts |
| Published area weight | 19% of the 100-question national portion |
| Exam portion | National salesperson portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 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.
The lesson
These ideas work together. On the exam, the wrong answers usually describe a nearby concept, so learn where each one stops.
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
Georgia-specific distinction
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 1A tenant's lease gives a right of first refusal to buy the home. The owner receives a $310,000 outside offer and wants to accept it. What does the tenant's right allow?
- A. Buying at a price set by an appraisal
- B. Matching the $310,000 terms before the sale
- C. Buying at the price when the lease began
- D. Blocking any sale until the lease ends
Show answer and explanation →
Answer: B. Matching the $310,000 terms before the sale
A right of first refusal is triggered when the owner decides to accept an outside deal, and it lets the holder match those terms. The fixed-price answer describes an option, which is the right candidates most often confuse with first refusal.
Question 2An option gives a buyer 60 days to purchase at $300,000 by written notice delivered to the seller. The buyer sends notice on day 62. What is the result?
- A. Exercise is valid, since notice was sent
- B. The seller must allow a reasonable extension
- C. The option becomes a right of first refusal
- D. Exercise fails because the option expired
Show answer and explanation →
Answer: D. Exercise fails because the option expired
An option must be exercised exactly as its terms require, including the deadline, and this notice came after the option lapsed. Sending notice is the plausible reason to call it valid, but late exercise does not create the purchase contract.
Question 3Under which arrangement must an owner offer the property to the holder before marketing it to anyone else?
- A. Option to purchase
- B. Right of first refusal
- C. Right of first offer
- D. Exclusive-agency listing
Show answer and explanation →
Answer: C. Right of first offer
A right of first offer requires the owner to approach the holder first, before seeking outside buyers. Right of first refusal is the wrong choice, but that right waits for an outside offer and then lets the holder match it.
Ready to move on?
You are ready for the next lesson when all of these are true.
- Explain Options, Rights of First Refusal, and Related Rights in one clear answer without notes.
- Separate Option structure from Exercise using a fresh example.
- Apply the decision rule to a new fact pattern and name the fact that controls the result.
- State the Georgia-specific point or explain why the national rule applies unchanged.
- Answer every practice question and explain the rule each rejected option misapplies.
- Revisit this topic later in mixed practice without category labels.
Recommended next lesson
Continue with Purchase Agreements and Addenda. Exercising an option creates a purchase contract, so the next lesson walks through what that agreement must cover, from earnest money and contingencies to included fixtures, and when to use an addendum versus an amendment.
Return to the Contracts hub to see every official branch and the complete lesson sequence for this content area.