A reader wanted to know “What is ‘Option Pending’ on a home sale?” Presumably this is something he saw on a for sale sign or in an MLS listing. If there’s an option pending on a home he’s actually contracted to purchase then it’s time to slow down.
For your purposes as a buyer, a home with an option pending is about as useful as a home with a contract pending. An option pending means that the seller has committed to sell the home to a buyer for a certain price with a certain deadline. The difference between an option and a purchase contract is that the buyer isn’t obligated to purchase, but merely has the <em>option to purchase</em> at the buyer’s discretion. There may be any number of reasons for this, but if the option is valid the buyer has done something to make it worth the seller’s while, usually paying a price for the option itself.
As a potential buyer, you may want to keep an eye on this property to see if the option expires and the “Option Pending” is removed. You may want to inquire as to when the option will expire, so you can make an offer at that point.
It is also possible to buy the property subject to the option, but the obligation to sell would merely pass to you as the new owner, so the situations where you’d want to actually do this are very narrow. Since most well written options are notarized and recorded, they can cloud the title to the property if breached, so if you purchased a property with a valid option pending, you would have to honor it. If you are using a the property as collateral on a loan, the pending option would likely prevent getting a loan, so even buying the property subject to the option is only a real possibility for cash buyers.
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