Option Money in Georgia Real Estate: Pros, Cons and How to Explain It to Clients
- Melissa Gilbert
- Jul 18
- 4 min read
Updated: Jul 20
This article is part of our July 2026 Assisting All Agents update. See the complete monthly update.
Out of more than 400 contracts RHRE has processed so far this year, only one included option money.
That surprised me. While option money is common in some states, it's rarely used in Georgia. If it showed up in your next offer, would you know how to explain it to your buyer or seller?
What is Option Money?
Option money is an additional amount a buyer voluntarily pays directly to the seller in exchange for the contractual right to terminate during the due diligence period. Unlike earnest money, option money is generally nonrefundable if the buyer terminates under the due diligence provision. In Georgia, option money is uncommon, but in the right situation it can make an offer more attractive to a seller without increasing the purchase price.
Option money and earnest money are not the same thing
Option money is paid directly to the Seller. Earnest money is held by the Broker or Closing Attorney. That means, once you're under contract, you need to confirm both payments have been made and that both payments are honored by the bank, if applicable.
Why don't we see this more often in Georgia?
RHRE has processed more than 400 contracts so far this year, and we've only seen option money used once. That doesn't mean it's a bad strategy. It simply means it's a tool many Georgia agents rarely encounter, so it's worth understanding before it appears in one of your transactions.
Pros for Buyers
Makes your offer more attractive without increasing the purchase price
Some sellers may place value on a buyer voluntarily assuming additional financial risk, especially if the buyer is requesting other favorable terms.
Shows confidence and commitment
By offering option money, the buyer is communicating that they believe in the property and don't anticipate terminating unless due diligence uncovers something significant.
May create flexibility elsewhere in the negotiation
A seller may be more willing to consider:
a longer due diligence period
seller-paid closing costs
buyer broker compensation
a lower purchase price
because the buyer now has additional money at risk if they simply walk away.
Cons for Buyers
The money is generally nonrefundable
If the buyer terminates during due diligence, the seller typically keeps the option money.
It increases the cost of changing your mind
Even when a termination is justified, the buyer should understand that the option money is intended to compensate the seller for taking the property off the market.
It isn't necessary in every transaction
Many successful Georgia transactions close without option money. It should be viewed as one negotiation tool, not a standard practice.
Pros for Sellers
Compensation for taking the home off the market
Every seller assumes some risk when accepting an offer.
During due diligence:
showings often stop
marketing slows
competing buyers may move on
If the buyer terminates, the seller has lost valuable market time.
Option money helps compensate the seller for accepting that risk.
The buyer has more "skin in the game"
Because the buyer has voluntarily placed additional money at risk, they may be less likely to terminate over relatively minor inspection issues or use due diligence simply to renegotiate the purchase price.
May create a more balanced negotiation
In today's market, many sellers are already being asked to negotiate price, contribute toward buyer closing costs, pay buyer broker compensation, and address inspection concerns. Option money allows the buyer to assume a small amount of additional risk as well, creating a more balanced negotiation.
Cons for Sellers
It does not guarantee the transaction will close
The buyer still retains the contractual right to terminate during due diligence.
The seller simply keeps the option money.
A terminated contract still has consequences
Even if the seller keeps the option money, the property still returns to the market. Future buyers often ask why a previous contract failed, and inspection issues discovered during the first transaction may need to be disclosed or addressed. Option money softens the financial impact of a termination, but it doesn't eliminate the marketing impact.
Should your client consider using option money?
There isn't a one-size-fits-all answer.
Instead, encourage buyers and sellers to discuss:
the competitiveness of the market
the property's condition
the length of the due diligence period
the concessions being requested
each client's comfort with risk
Option money is simply another negotiation tool. While it's uncommon in Georgia today, understanding how it works gives you another option to discuss when the right situation arises.
Disclaimer: This article is for informational purposes only and does not constitute legal or financial advice. Agents should consult their managing broker for specific client situations.
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