In an option agreement, what happens once the option is exercised?

When an option agreement is exercised, it serves as a sale contract. An option agreement grants the holder the right, but not the obligation, to purchase a property at a specified price within a certain timeframe. Once the holder decides to exercise this option, the terms outlined in the agreement transition into a binding sales contract. This means that the buyer is now obligated to complete the purchase of the property at the agreed price, and the seller is required to sell under the terms specified, thus formally initiating the sale transaction.

In context, the other options do not reflect the nature of exercising an option. For instance, an option agreement does not convert into a rental contract, as it pertains to the purchase of property rather than leasing. Additionally, the option itself does not become voided upon being exercised; instead, it takes on new significance as a contract for sale. Lastly, the seller is not obligated to refund the option money when the option is exercised; that money typically acts as consideration for the option agreement and may be applied to the purchase price or may be non-refundable depending on the terms of the contract.