Land records · Parcel maps · October 7, 2026
What Is an Option to Purchase Real Estate?
What is an option to purchase real estate? A contract giving a buyer the right, not the obligation, to buy a property at set terms within a set time.
What is an option to purchase real estate? An option to purchase is a contract in which a property owner gives another person the exclusive right, but not the obligation, to buy the property at an agreed price and terms within a set period. The person receiving the option usually pays an option fee for that right. If they decide to buy, they exercise the option according to its terms, and the owner must sell. If they do not exercise it before it expires, the option ends and the owner keeps the fee. Options are used by developers, tenants, investors, and energy companies. This page is general land-records background, not legal advice.
Key terms
| Term | Meaning |
|---|---|
| Optionor | The owner granting the option |
| Optionee | The person holding the option |
| Option fee | Payment for the right, often non-refundable |
| Strike price | The agreed purchase price |
| Option period | How long the option lasts |
| Exercise | Formal notice that the optionee will buy |
How an option works
- The parties sign an option agreement and the optionee pays the fee.
- The optionee investigates the property, zoning, or financing.
- The optionee exercises by giving written notice within the period, or lets it expire.
- If exercised, the parties close like a regular sale.
Option vs purchase contract
A purchase contract binds both sides to complete the sale, subject to contingencies. An option binds only the owner; the optionee can walk away by not exercising. That flexibility is why developers use options to tie up land while seeking approvals.
Option vs right of first refusal
A right of first refusal only allows matching an offer if the owner decides to sell. An option lets the holder buy whether or not the owner wants to sell, during the option period.
Lease options
A lease with an option to buy lets a tenant rent the property with the right to purchase later. Part of the rent may be credited toward the price. Some arrangements are treated as installment sales or regulated as consumer transactions.
Recording the option
Options are usually protected by recording a memorandum of option rather than the full agreement. Recording gives notice to later buyers and lenders.
Common uses
- Developers securing land pending zoning.
- Tenants in commercial or ground leases.
- Solar and wind companies evaluating sites.
- Family buy-out arrangements.
Risks
Owners give up flexibility during the option period. Optionees risk losing the fee. Ambiguous exercise provisions can cause disputes. Expired options should be released of record.
Exercising correctly
Follow the agreement’s notice rules exactly: deliver written notice to the right address, by the stated method, before the deadline. Late or improper notice can cause the option to lapse.
Bottom line
An option to purchase gives the holder the right, but not the obligation, to buy a property on set terms within a set time, usually for a fee. It differs from a purchase contract and a right of first refusal. Recording a memorandum protects the holder. Find county recorders via the Platbookmapper map.
What is an option to purchase real estate FAQ
What is an option to purchase real estate?
A right, but not an obligation, to buy property on set terms within a time limit.
Is the option fee refundable?
Usually not, unless the agreement says otherwise.
Does the owner have to sell if the option is exercised?
Yes, according to the option terms.
How is an option recorded?
Usually through a memorandum of option.
What is a lease option?
A lease that includes an option for the tenant to buy.