National Real Estate Exam (PSI)ContractsEasy
A property owner grants a buyer an option to purchase a parcel of land within 90 days at a fixed price. What right does this give the buyer (optionee)?
- AAn obligation to purchase the property within 90 days
- BThe right to lease the property indefinitely
- CThe right, but not the obligation, to purchase at the agreed terms
- DAutomatic ownership of the property once signed
Show answer & explanationAnswer & explanation
Correct answer: C. The right, but not the obligation, to purchase at the agreed terms
An option contract gives the optionee (buyer) the right, but not the obligation, to purchase the property under specified terms within a set time period. The optionor (owner) is bound if the optionee chooses to exercise the option.
Why the other options are wrong
- A. An option is not an obligation to buy, only a right.
- B. An option relates to a future purchase, not a lease.
- D. Signing an option does not transfer ownership.
Option Contract
A contract giving one party the right, but not the obligation, to buy or lease property at agreed terms within a specified time.
- Optionee has the right, not obligation
- Optionor is bound if optionee exercises
- Requires separate consideration to be valid
- If not exercised, option simply expires
Memory trick: Options are like a 'maybe' ticket - you choose whether to use it