Option Contract
An option contract is a promise to keep an offer open for acceptance by the other party for a specified period; during that period the offeror cannot revoke the offer. In real estate development, option structures are frequently used to control a site while the developer evaluates feasibility and pursues approvals, without obligating the optionee to purchase unless the option is exercised.
- Where it applies
- Generally, not specific to New York
- When it comes up
- Site acquisition; diligence; entitlements
- Property types
- All; especially land and redevelopment sites with entitlement uncertainty
In practice
Option pricing often embeds entitlement risk: longer option periods and more seller "tie-up" tend to shift value from the buyer to the seller via option consideration and extension payments.
Related terms
Land and Site Acquisition
General information, not legal, tax or financial advice.