Definition
This is a right to purchase property at a predetermined price within a specified time period, without obligation to buy. It's valuable to lock in price while you decide.
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Option to purchase gives buyer right (not obligation) to buy. Example: tenant has 2-year option to purchase at $400,000. Within 2 years, tenant can buy at that price (option holder's choice). After 2 years, option expires. Options are valuable: lock in price (protects against appreciation), maintain flexibility (no obligation to buy). Options require: specified price/terms, specified time period, holder pays option fee (usually $500-5,000, might be credited toward purchase). Options are common in: commercial leases (tenant options), land sales (hold property while financing arranged), development agreements. Options can complicate sales: owner can't sell property until option expires (unless option holder waives). Understanding options: valuable if you're uncertain about purchase; landlord's risk if tenant delays decision. Option is more valuable than ROFR: ROFR matches third-party offer; option locks in price regardless of market.
Pro Tip
Options are valuable if uncertain about purchase. Pay option fee to lock in price.
Example
Tenant pays $2,000 for 3-year purchase option at $500,000. Can buy within 3 years at that price, or option expires.