Options to Purchase

Options to Purchase: Overview

An option to purchase is a contractual right or interest granted by the owner of property to someone who wants to purchase the property at a future time. The option to purchase gives the proposed purchaser the right to purchase the property in the future according to certain specified terms at a certain time in the future or upon occurrence of specified future events.


There are two basic forms of options to purchase:


      A stand-alone document which grants an option to purchase to a person holding a less than fee simple interest in the property or a person with no interest in the property.   

      A lease-option, whereby the lessee has an option to purchase the leased property under the terms of the lease. 


The laws of some states consider an option to purchase as being a personal contract right (personal property) rather than an interest in real property and therefore, such option would not be insurable. Other states recognize only options tied to specific real property interests, such as the lease-option. It is important to know how the laws in your jurisdiction treat options. Consult with your Agents National Title underwriting counsel before agreeing to insure an option to purchase in any form


In order to provide constructive notice, an option must be recorded and must not violate the rule against perpetuities in your state. In addition, the option instrument must clearly establish the purchase price for the option.