What is an Option Clause in a real estate contract?

An Option Clause is a clause in a real estate contract that gives the buyer the right, but not the obligation to buy the property within a specified time. This gives the buyer the ability to "opt out" of the contract if they change their mind. In Michigan, an Option Clause must be agreed upon between both the buyer and the seller before it can be included in the real estate contract. An Option Clause can be beneficial for buyers who need time to secure financing or who need to sell an existing property before they can purchase the new property. It enables them to purchase the property later on without fear of it being sold out from under them. The Option Clause will usually state the amount of money the buyer must provide the seller in exchange for the option. This money, called an Option Fee, is non-refundable and is usually equal to a percentage of the purchase price of the property. The buyer has the option to buy the property within the time frame stated in the Option Clause, or else they forfeit the Option Fee and the property can be put back on the market. If the buyer does exercise their option to purchase, the Option Fee will usually then be applied to the purchase price. In Michigan, both the buyer and seller must agree to an Option Clause and it must be included in the final real estate contract in order for it to be valid. An Option Clause can be a great way to give buyers more time to make a decision and can be a great asset for both parties.

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What is an Option Clause in a real estate contract?

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