option fee

this is not a big issue but i kept on seeing examples of people offer 1 dollar as option consideration to the seller. When the seller looks at the contract and asks :“what is the option consideration fee?”

what’s the best way to answer it?
It might not be a big deal but better be prepared than sorry.

I think i will just give 10$ and say “it’s just a clause in the contract to make the contract legal.”

hey oops posted at wrong section, it’s suppose to go under L/O

That’s what I say. I make it out to be the trival formality that it is: “Oh by the way, I have to give you this dollar as a token to make the contract legal…treat yourself to half a coffee.”

Are you serious, you guys are telling your sellers that the option is just a ‘trivial’ portion of the contract. It’s anything but, they are giving you the option to take their property for an agreed price. You need to be clear and honest in contract discussions else you’re begging for a lawsuit.

The option FEE of $1.00 is trivial, it’s debatable whether it’s even required with all the other consideration involved in the deal.

a promissory note could be consideration, three days to pull out is consideration, and once signed the contract itself is consideration.

normally a fee is only that, what ever fee you come up with is the fee or a negotiation starting point. when i first started out, i gave every home owner $10 consideration. They were puzzled because they weren’t expecting anything in return. Now i offer nothing and a deposit never comes up unless i am dealing with a unmotivated seller.

Then i proceed to ask them “what they think is fair since i am not sure i really want to buy the property and no telling what might come back on the inspection, so what fee is fair to you?”

hey CharlottePlayer, are you sure it’s still a valid contract if you do not give any option consideration?

from what i understand, by definition a valid contract has to have each side getting something out of the contract. I get the option to purchase the house, the seller get the option consideration fee. so i thought the minimum of 1$ (or 1 cent actually) is required to make the contract binding.

obviously most people do not know there is a option consideration fee, but because it is written in the contract, i have to somehow explain it.

You need to pay something to make the contract valid. At least that’s the law in Pennsylvania. I use a lawyer for everything and my contracts all have some form of money involved.

The best way to explain it to the person is that it’s a legality and you need to give them the $1 to make the contract legal. You defintely don’t want to focus on the fact that they can keep the $1 of decide not to exercise your option.

I hope this helps,


Hey guys. Seriously. Any of you out there thinking of ways to fudge what parts of a contract mean, get out of real estate investing. You’ll end up being sued so much that all of your profits will line your attorney’s Armani suits.


Come on! Next thing you’ll be telling us you need to write your full name and the legal description of the property! :biggrin


You are asking the owner to give you an option to purchase the property and you are asking the owner to sign a contract which obligates the owner to sell the property to you if you decide to exercise the option. In exchange, you give the seller something of value – “consideration”. If there is no consideration given to homeowner, then your option agreement (a contract) is not enforceable. I don’t see any other consideration involved other than the option and what you pay for the option.

I guess I don’t understand your comment. Do Canadians have a different concept of contract law that differs from US law?

“Consideration” is anything of value, it doesn’t have to be money. I think it could easily be argued that agreeing to make payments to the seller (under the lease) that cover their mortgage is more than enough consideration for the right to buy the house later.

I disagree, the lease option contract is a two-phase agreement. Lease payments are your consideration in return for the right to occupy the home while the option fee is your consideration for the right to purchase the home.

in NC, our offer to purchase has 2 distinct buying options…

in a nutshell, option one is used when you are using repair, loan or appraisal contingencies.

option two on our contract pretty much states you can walk from the deal for any or no reason for an option period you’ve determined and written into the contract. here, its usually 10 days.

the option money are the funds you present to the seller if you use option 2 of the contract and decide to terminate the contract. the option fee is simply there to give the seller some kind of consideration for allowing you to tie up their property for the 10 day option period.

Contract law in Canada is essentially the same as the US, they both have evolved from British Common Law tradition. (Quebec may be different as they use a civil code system.)

Here in New Brunswick, Canada, we would actually use two separate contracts in a L/O deal.
One would be the purchase option, which would require monetary consideration that would allow you to purchase the property whenever you desire.
The second contract would simply be a lease that spelled out the monthly payment, term, responsibilities of tenant and landlord, etc…


The option consideration does not have to me money. It just needs to show you gave something of value to the seller for the contract. So…offer to shine his shoes.