In my last post, I described what an option contract is. I promised that I would have more about what we need to know specifically for the Florida sales associate state exam in this post.
First, an option contract is unilateral contract binding upon the optionor. The optionor is the seller. Using the story from my previous post, Demetree is the optionor because he gave the option to Disney, who is the optionee. The contract is unilateral because Disney doesn’t have to buy. However, if Disney wants to buy, Demetree has to sell.
We also need to know that an option contract requires consideration. Token consideration doesn’t count. In the previous post, Disney paid $25,000 for the option to purchase the property. That’s a decent amount of money. If Disney had paid $50, the contract would not have been enforceable because that is considered token consideration. Additionally, if the $25,000 had been refundable if Disney decided not to buy, then it is not consideration.
Lastly, real estate licensees are allowed to buy options on contracts but they must divest themselves of their role as licensees. In other words, the licensee needs to disclose that she is a licensee, but that is not acting as a licensee in this transaction. If they don’t divest themselves, and they don’t pay consideration, then it is basically a listing agreement. In this case, they would be entitled to a commission.
If you have any questions about option contracts or anything else on the Florida real estate state exam, give me a call. I’m happy to help. By the way, I answer my own phone. If you call 407-493-3974, you will reach me.
Please note that neither I, nor anyone in the Climer family, have any affiliation with Climer School of Real Estate. My father, Ron Climer, sold Climer School of Real Estate in 2014. You can find me at Demetree School of Real Estate.