Purchasing a house is a somewhat complicated process. Typically, if the buyer's offer is accepted by the seller, the transaction will not be completed or "closed" for several weeks. During this time the buyer may gather more information about the house or research other houses in the area. Some home purchase contracts include an option fee. The buyer may pay the seller a few hundred dollars for the right to walk away from the contract prior to closing for any reason. This option fee can be best described as:

Question

Quizplus · Accepted Answer

An option fee is a fee paid by the buyer to the seller in exchange for the option to walk away from the contract for any reason prior to closing. It is not a follow-on investment, a change in operations, or a put option on the house. The option fee provides the buyer with the option to defer their investment in the house until they have gathered more information or researched other houses in the area.

Purchasing a House Is a Somewhat Complicated Process