What the heck is option money?

[May Baten]

It’s our first time buying a multi family property. It’s a small 6-unit apartment building. Our agent is asking for option money, but is unable to clearly explain what the heck it is. We’ve purchased single family homes twice and have never run into this. We know and understand Ernest money, but what’s option money?

Thank you!

[Steve Vaughan]

Funny your (commercial?) agent is unsure what this is.

Option fees are more common with commercial income property sales.  Tire kickers with no skin in yet bothering residents by viewing apts or stores/offices is annoying and detrimental to our business.  An option fee (usually non-refundable but credited at closing) helps weed out the tire kickers.

A slant on this is earnest money "going hard" halfway through or so of DD while under contract. How much of an option fee is the seller asking for? Most aren't a ton on a 6 unit.