What is an Option Clause in a real estate contract?

An Option Clause in a real estate contract is a clause that gives one or both of the parties involved in the contract the right to terminate the agreement before the expiration date. In California, this clause is typically found in residential real estate contracts. The Option Clause gives the party holding the option the right to walk away from the agreement without being liable for any financial penalties or damages, as long as they exercise the option within the timeframe specified in the contract. This is beneficial to the parties involved because it provides some flexibility in the contract, allowing them to end the agreement without any repercussions if their circumstances have changed. The Option Clause is usually limited in the time frame in which it can be used. Generally, the timeframe is between three and six months after the contract is signed. In addition, both parties are typically required to give each other at least two weeks’ notice before exercising their option to end the contract. The Option Clause can be used for both buyers and sellers. For buyers, it can allow them to back out of a purchase if an inspection reveals too many problems or if the market changes significantly. For sellers, it can give them an opportunity to terminate the agreement if a better offer is made before the expiration date.

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What is an Option Clause in a real estate contract?

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