Final answer:
An option contract is a legal agreement between the seller and the buyer, where the buyer has the right, but not the obligation, to purchase the property at a specified price within a specified time period.
Step-by-step explanation:
This is an example of an option contract. An option contract is a legal agreement between the seller (Owner A) and the buyer (Buyer B), where the buyer has the right, but not the obligation, to purchase the property at a specified price within a specified time period.
In this case, Owner A agrees to sell her property to Buyer B for $500,000 if Buyer B wishes to proceed with the sale within the next year. Buyer B has the option to exercise the contract or not.
An option contract is commonly used in real estate transactions to provide flexibility for both parties and allows the buyer to secure the property at a predetermined price before making the final decision to purchase.