What is an 'option contract' in real estate?

An option contract gives the buyer the exclusive right to purchase property at predetermined terms during a specified period, without obligation. Elements: (1) Optionor — the property owner granting the option; (2) Optionee — the prospective buyer holding the option; (3) Option consideration — money paid to the optionor to keep the option open (often non-refundable, usually applied to purchase price if exercised); (4) Option period — the time during which the option can be exercised; (5) Strike price — the price at which the optionee can purchase. The optionee has the right to: exercise the option (buy at the agreed price), let the option expire (forfeit consideration), or in some cases sell/assign the option to a third party. The optionor cannot sell to anyone else during the option period. Common uses: developers locking up land while seeking financing or zoning; investors controlling property without committing; lease-options for tenants who may want to buy. Option contracts are unilateral until exercised (only one party is obligated — the optionor must sell if optionee exercises; the optionee has no obligation to buy).