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Uploaded by: euinvest101 on May 1, 2012
Darwin Horan -the mechanics of a real estate option transaction
Step 1: The optionee pays a real estate option fee to the optionor.
Step 2: The optionor grants the optionee the exclusive, unrestricted, and irrevocable
right and option to purchase a property at a fixed purchase price
during the option period by executing a real estate option agreement with
Step 3: The optionee assigns or exercises his or her real estate option or lets
Step 4: Once exercised, a real estate option agreement turns into a bilateral
agreement in which the optionee becomes the buyer and the optionor becomes
Step 5: The seller transfers the property's title to the buyer at the closing.
The Legal Status of Real Estate Options
Varies from State to State
Unfortunately, there's no Uniform Commercial Code equivalent for real estate
options. The legal status of real estate options varies from state to state. In most
states, the legal status of real estate options has evolved over the years from a
combination of common and case law. The case law that regulates estate options
in most states is the result of various lawsuits involving legal disputes between
optionees and optionors over the use of real estate options. To know the legal
status of real estate options in your state, you should consult with a board-
certified real estate attorney who is familiar with how real estate options work
in your state. I suggest that you ask your real estate attorney the following four
1. What constitutes a valid and fully enforceable real estate option agreement?
2. Does a real estate option, prior to its being exercised, create an estate in
3. Can a real estate option be recorded in the public records so it constitutes
4. Does a real estate option violate any rule against perpetuities that your
state may have?
In some states, most notably Ca