option money note

What is an option money note

Option Money is the fee that is paid by the buyer to the seller for the right to terminate the contract for a period of time which is also known as the option period. The fee depends on the terms of the contract and the home price. During this period of time, inspections of the property are done or even quotes are gathered by the sellers or buyers for repairs that the buyer might think needed. In quite simpler terms the buyer is actually paying the seller so that the property is taken off the market and meanwhile is checked more thoroughly and they can negotiate for any kind of unknown repairs or problems.

Technically speaking, real estate agents can still display the house or write a back up contract with a buyer. But even then the seller has to honor his primary contract. Only a buyer who has paid the option fee is allowed to do this.

Now, to maintain the above contract an Option Money Note is drawn up. It obviously has the signatures of both parties and the property address is also clearly mentioned. The Option Money Note shows the promise to pay the decided fee or money for the option to purchase the property. Any interest rate or amount is mentioned; this needs to be paid on any unpaid principal. Then the payments are mentioned which are usually on a monthly basis. This is done until the principal and interest is totally paid off. If there is any failure to pay the alternative is also clearly mentioned.

Option Money Note

Option Money Note

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Sample Template Preview

Option Money Promissory Note

$__________________U.S. Dollars                        Date: _______________________

                                                                           City: _______________________

Property Address:____________________________________________________________

WHEREAS, the undersigned has been granted an option to purchase the above referenced property dated ___________, 20_______, the undersigned covenants and agrees as follows:


In consideration for an option to purchase the above referenced property, I promise to pay to the order of ______________________(“Landlord”) the sum of $_____________________ (this amount is called “principal”), plus interest.


Interest will be charged on unpaid principal until the full amount of principal has been paid. I
will pay interest at a yearly rate of ___________________%


I will make my monthly payments in the amount of $_________________on the first day of each month beginning on ________________, 20______ at ____________________________ _________________________________ or at a different place if required by the Note Holder.  I will make these payments every month until I have paid all of the principal and interest and any other charges described below that I may owe under this Note. My monthly payments will be applied to interest before principal. If, on ____________________, 20_____ , I still owe amounts under this Note, I will pay those amounts in full on that date, which is called the “maturity date.”


(A) Late Charge for Overdue Payments. If the Note Holder has not received the full amount of any monthly payment by the end of 10 calendar days after the date it is due, I will pay a late charge to the Note Holder. The amount of the charge will be 5% of the installment due for that month.  I will pay this late charge promptly but only once on each late payment.

(B) Default.  If I do not pay the full amount of each monthly payment on the date it is due, I
will be in default.  Once default occurs, the principal balance and late charges remaining shall accrue interest at the rate of 18% or the highest rate permitted by state law.

(C) No Waiver By Note Holder. Even if, at a time when I am in default, the Note Holder does not require me to pay immediately in full as described above, the Note Holder will still have the right to do so if I am in default at a later time.

(D) Payment of Note Holder’s Costs and Expenses. If the Note Holder has required me to pay immediately in full as described above, the Note Holder will have the right to be paid back by me for all of its costs and expenses in enforcing this Note to the extent not prohibited by applicable law. Those expenses include, for example, reasonable attorney’s fees.


If more than one person signs this Note, each person is fully and personally obligated to keep all of the promises made in this Note, including the promise to pay the full amount owed. Any person who is a guarantor, surety or endorser of this Note is also obligated to do these things. Any person who takes over these obligations, including the obligations of a guarantor, surety or endorser of this Note, is also obligated to keep all of the promises made in this Note. The Note Holder may enforce its rights under this Note against each person individually or against all of us together. This means that any one of us may be required to pay all of the amounts owed under this Note.


I and any other person who has obligations under this Note waive the rights of presentment and notice of dishonor.  “Presentment” means the right to require the Note Holder to demand payment of amounts due.  “Notice of dishonor” means the right to require the Note Holder to give notice to other persons that amounts due have not been paid.