Property investors get involved in several transactions, whether it’s buying or selling a house. While the nature of some of these deals may seem more straightforward for any property investor, even seasoned and experienced professionals understand that there are complexities when it comes down to the legalities of each one.
Make the wrong move within a property purchase, and you can lose a bid to someone else, be stuck with a deal, have rights expire or more. The more you know about what many property investors face, such as option agreements, can be enlightening.
Option terms are typically short and clear for some property investors. If you are new to the world of property investments and you’d like to know more, keep reading.
Defining Option Agreements
A property option agreement is a contract between a vendor and a buyer. Under this contract, the parties agree on a purchase price at a specified time in the future. The buyer also has to pay the vendor an option fee in most circumstances.
Property option contracts allow a seller to lock in a specific price in the future and give the buyer time to find the funds. These agreements are common between landowners and property developers wishing to develop a piece of land.
Noting Option Agreement Sides
There are two kinds of sides when it comes to the option agreement that has to be considered, namely a call option or put option. A call option is when an option holder has a right to buy a property from a seller, which is what property investors typically land in.
Meanwhile, a put option is given to the seller in an option agreement. This stipulates that the seller has the right to sell to the buyer if they do not buy the property on or before a specified date. Both sides typically exclude the obligations.
Learning the Elements of Option Agreements
The elements of an option contract involve terms of the property, date of expiration, amount to be paid, conditions to be met and other information that may need to be included. This holds some similarity to an estate contract, but there’s much more flexibility in the terms.
In many cases, an option agreement will have a clause on what happens if an option is not executed or exercised. This can include the buyer forfeiting their deposit or the seller getting double their deposit.
Seeking an Understanding of Option Agreements
Understanding the different details, components and more of an option agreement can help build a better picture of how to handle them in your real estate dealings. Being more aware of your own rights and obligations, along with the other party involved, is a good advantage.
But aside from its benefits, understanding option agreements within transactions is a must to avoid certain blunders. Property investors should look into hiring a lawyer who can help shape and give you knowledge about property laws within Australia.
Conclusion
It is only important for property investors to understand what an option agreement is when dealing with the market. This makes sure that there is a clear understanding when negotiating a property contract. Failing to do so will lead to confusion and possible disputes.
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