California Real Estate Practice Exam

All the following statements about an option given to an optionee for a $1,000 consideration are true, except:

1. The consideration is valid

2. The optionee has a legal interest in the property

3. The optionee has no obligation to purchase

4. The optionor must sell the property

The correct answer is: The consideration is valid

The correct understanding involves recognizing the nature of an option in real estate. When an option is granted to the optionee for a certain consideration, the optionee receives the right, but not the obligation, to purchase the property at the agreed-upon price within a specified time frame. The statement regarding the validity of the consideration is accurate; however, the consideration for an option, even for a nominal amount like $1,000, is indeed valid under the law. Hence, consideration itself cannot be the reason for the incorrect statement. The statement that the optionee has a legal interest in the property is true because the option creates a binding contract that gives the optionee specific rights regarding the property. Additionally, the optionee retains the choice whether to proceed with the purchase, which means there is no obligation to buy unless they choose to execute the option, making that statement correct as well. On the other hand, the statement that the optionor must sell the property is crucial, as it underscores the commitment of the optionor to sell under the terms agreed upon. This obligation arises only if the option is exercised by the optionee. In this context, the validity of the consideration stands solid, and therefore the correct answer should address the misconceptions about