Two ways for controlling land plots include the purchase option and the earnest money contract.
The purchase option provides the right to the investor to purchase a particular land plot at an agreed price and within a very clearly defined period that expires at a particular date, as stipulated in the purchase option contract. Of course, the seller requires a compensation for holding the property off the market for the period specified in the purchase option contract. The compensation is agreed and paid by the investor upon signing of the contract.
If the investor decides to exercise its option to purchase the land plot, then the option price can be applied to the purchase price. If the option is not exercised the seller keeps the deposit paid by the investor. The purchase option provides to the investor a very useful tool for controlling land because it provides valuable time to evaluate carefully the site in terms of what it can be build and whether any of the allowable land uses will be profitable, given the local market conditions and its prospects.
The earnest money contract is actually an offer and acceptance contract, which sets the terms of the buyer (including the price offered) for acquiring the particular plot of land. Typically, the buyer substantiates his/her offer with a deposit (“earnest money”). Upon acceptance of the offer from the seller the investor secures the right to purchase within a limited time the land plot under consideration at the pre-agreed price.
