fbpx

Real estate is a complex industry with its own jargon and terminology. Among the many terms you might come across as a buyer or seller of property is “active option contract.” In this article, we`ll explore what this term means and how it can affect your real estate transactions.

An active option contract is a legal agreement between a buyer and a seller that gives the buyer the right but not the obligation to purchase a property at a predetermined price within a certain period of time. This time frame is typically 30 to 60 days, but it can be longer or shorter depending on what the buyer and seller agree on.

The active part of the option contract comes into play when the buyer pays an option fee to the seller, which is typically 1% or 2% of the purchase price. This fee gives the buyer the right to purchase the property during the agreed-upon option period. However, if the buyer chooses not to buy the property or does not meet certain conditions, the option fee is forfeited to the seller.

One common condition of an active option contract is a due diligence period. During this time, the buyer has the opportunity to investigate the property for any issues that may affect its value or suitability for their needs. This can include appraisals, inspections, and title reviews. If the buyer discovers any problems during this period, they can usually back out of the contract without forfeiting their option fee.

The active option contract is often used in situations where the buyer needs more time to secure financing or wants to make sure the property meets their needs before committing to the purchase. It can also be a useful tool for sellers who want to test the market before selling their property outright.

However, active option contracts can be complicated, and it`s essential to work with an experienced real estate professional who has expertise in this area. The contract should outline all the terms and conditions of the agreement, including the price, option period, and any contingencies.

In conclusion, an active option contract is a legal agreement between a buyer and a seller that gives the buyer the right but not the obligation to purchase a property at a predetermined price within a certain period of time. It`s typically used in situations where the buyer needs more time to secure financing or wants to make sure the property meets their needs before committing to the purchase. If you`re considering using an active option contract, be sure to consult with a knowledgeable real estate professional who can help guide you through the process.