Option vs. Option Contract?

Hi, folks. I keep hearing about “option contracts” and how they are becoming more and more popular to use. What is the difference between “option contracts” and “options” with regards to real estate? I’m familiar with “options” but don’t understand why the sudden interest in “option contracts”.

If you give a property owner some money for the right to purchase his property at a set price sometime in the future, you have purchased an OPTION on his property.

The piece of paper which specifies the terms of the option arrangement, and which you both sign, is the OPTION CONTRACT.

Thanks, Dave. If I understand you correctly then, an “option” and “option contract” are the same thing. If I’m mistaken, please let me know.

Think of it this way. If you own a car, you also have a piece of paper called a title which serves notice to everyone concerned that you are the legal owner of the car and have the legal right to sell the car should you wish to do so. The title is not the car, but is the documentation that proves your ownership and that you are entitled to all the rights of ownership.

Same way with an option and an option contract. The option is the thing that you purchase from the property owner. The executed contract is the proof of your ownership which also specifies your rights of ownership and the date upon which your ownership rights expire.

Nearly everyone in these forums will know what you really mean regardless of which term you use.

Thanks, Dave. You should have been a lawyer. One of my favorite quotes is from the movie, “Philadelphia”, where Denzel Washington says, “Explain it to me like I’m a 6-year-old kid.”

I wish lawyers really did that.

Better than a lawyer, I was a teacher at a junior college for a time. I got very adept at presenting difficult concepts to college freshmen in a way a sixth grader could understand.