Florida Real Estate Sales Associate Examination Content OutlineReal Estate Contracts and AgencyEasy
A buyer is interested in purchasing a property but wants the option to buy it within the next year at a predetermined price, without being obligated to buy. What type of contract should they enter into with the seller?
- AInstallment sales contract
- BRight of first refusal
- COption contract
- DPurchase and sale agreement
Show answer & explanationAnswer & explanation
Correct answer: C. Option contract
An option contract gives the buyer (optionee) the right, but not the obligation, to purchase a property at a specified price within a certain timeframe. The buyer pays for this right.
Why the other options are wrong
- A. An installment sales contract (land contract) involves the buyer making payments directly to the seller over time, while the seller retains legal title until full payment, which is not what the buyer is seeking.
- B. A right of first refusal only allows the holder to match an offer made by a third party, it doesn't create an option to buy at a predetermined price or time.
- D. A purchase and sale agreement is a binding contract to buy and sell, which obligates the buyer.
Option Contract
A unilateral contract where the seller (optionor) grants the buyer (optionee) the exclusive right to purchase a property within a specified period at a predetermined price, for which the buyer pays consideration.
- Buyer has right, not obligation, to buy
- Seller is obligated to sell if option is exercised
- Requires consideration from buyer
Memory trick: Purchase is a promise, Option is a choice, First Refusal is a match.