Under Kentucky law, which of the following best describes an 'option contract' in a real estate transaction?
Correct Answer
A) A contract that gives the buyer the right, but not the obligation, to purchase a property within a specified time for a set price
An option contract in Kentucky real estate gives the option holder (typically the buyer) the exclusive right, but not the obligation, to purchase a specified property at a predetermined price within a defined time period. The buyer pays option consideration to the seller to keep the offer open. If the buyer exercises the option, a binding purchase contract is formed. If the buyer does not exercise the option within the specified period, the option expires and the seller retains the option consideration.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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- → A Rhode Island licensee encounters a listing contract is drafted. What should the licensee remember?
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- → A Rhode Island licensee encounters a listing agreement lets the principal broker retain a portion of deposit money upon buyer default. What should the licensee remember?
- → A Hawaii licensee is reviewing the commission asks to inspect escrow and trust records. What is the best answer?
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