What Is an Option Fee?
An option fee is money a buyer pays a seller in exchange for the exclusive right to purchase property within a set period, without obligating the buyer to actually buy. It is the consideration that makes an option contract binding: in return for the fee, the seller agrees to hold the property off the market and keep the offer open for the option holder.
How an Option Fee Works
- The buyer pays the fee for the right, but not the obligation, to buy
- The seller is bound to sell on the agreed terms if the buyer exercises the option
- The fee is usually non-refundable, though it may be credited toward the purchase price if the buyer closes
- If the buyer lets the option expire, the seller keeps the fee and is free to sell to others
Option Fee vs. Earnest Money
An option fee buys time and the right to decide, and is typically non-refundable; earnest money is a good-faith deposit toward a purchase the buyer has actually agreed to make, and is often refundable if a contingency fails. The two serve different roles and may both appear in a transaction.
Related Terms
- Earnest Money — Distinguished from a non-refundable option fee
- Consideration — What the option fee provides
- Right of First Offer — A related pre-sale right
Barnes Walker Real Estate
Barnes Walker's real estate attorneys draft and review option contracts and purchase agreements for Florida buyers and sellers. Request a legal inquiry for assistance.
Reviewed by the attorneys at Barnes Walker, Goethe, Shea & Robinson, PLLC