What is an option contract in real estate?

An option contract gives the holder the right, but not the obligation, to purchase a property at a specified price within a defined time period. The buyer pays option consideration, which is typically non-refundable, in exchange for the seller's promise to keep the offer open. During the option period, the seller cannot sell to anyone else and cannot revoke the offer. If the buyer exercises the option, the option consideration is usually applied to the purchase price. If the buyer does not exercise the option before it expires, the seller keeps the consideration and is free to sell to others. ---