Massachusetts Real Estate License Practice Test

What is the purpose of an option in real estate transactions?

1. To establish a mortgage agreement

2. To allow potential buyers to purchase at a later time

3. To finalize a sale immediately

4. To negotiate lease terms

The correct answer is: To allow potential buyers to purchase at a later time

The purpose of an option in real estate transactions is to allow potential buyers to purchase a property at a later time. An option agreement provides the buyer with the exclusive right, but not the obligation, to purchase the property within a specified timeframe and at a predetermined price. This flexibility is beneficial to buyers who may need time to secure financing or who want to assess the property further before committing to the purchase. Establishing a mortgage agreement pertains to securing a loan, which is not the function of an option. Finalizing a sale immediately contradicts the nature of an option, as it is not a binding purchase agreement but rather a potential future sale. Negotiating lease terms is also unrelated, as it specifically deals with rental agreements and not ownership options for a property. Thus, the correct option highlights the essence of an option agreement in real estate: providing the buyer with a future purchasing opportunity.