What is an 'option contract' in real estate?

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An 'option contract' in real estate specifically grants a buyer the right, but not the obligation, to purchase a property at a pre-determined price within a specified time frame. This contractual relationship provides the buyer with the flexibility to decide whether to move forward with the purchase, allowing them to secure the property while mitigating the risk of outright commitment. The seller agrees to not sell the property to anyone else during the option period, effectively taking the property off the market.

This arrangement is particularly useful in scenarios where the buyer may require additional time to secure financing, conduct due diligence, or assess their intentions regarding the property. In contrast, the other options describe different types of agreements or misunderstandings about the nature of option contracts. A binding agreement that requires a buyer to purchase a property entails a purchase contract, not an option. Selling an option to multiple buyers introduces complications that don't align with the standard legal definition of an option contract, which is exclusive. Lastly, a lease agreement with a purchase option pertains to a separate arrangement that allows a tenant to purchase the property, again distinguishable from the core characteristics of option contracts.

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