In a Texas Residential Real Estate agreement, a buyer may choose to have an option period in exchange for an option fee.
An option period is a period of time when a buyer is allowed to terminate a purchase contract for ANY REASON – or no reason at all. A buyer offers the seller a sum of money for this “right terminate for any reason.” The fee, called an Option Fee, is offered at the time the offer is submitted. If accepted, the seller collects the fee. During the Option Period, a buyer can:
- Hire an Inspector
- Shop Mortgages
- Shop Insurance providers
- Shop Home Protection Plans
- Tour New Listings
- and more
An option period can be any number of days for any amount of money, as long as both the buyer and seller agree.
$25 a day for a 7-day option period totaling $175 payable to the seller. During the Option Period (the first seven days of the contract), a buyer can have the home inspected. If repairs are recommended, a buyer can submit a repair list to the seller BEFORE the option period expires. If the seller agrees to the repairs, the option period can expire and everyone moves forward towards closing – the option fee can be credited back to the buyer at closing.
If, during the option period, the seller is non-negotiable regarding repairs or any other contingency, a buyer can choose to walk away and terminate the contract. The buyer’s Earnest Money is typically refunded and the seller keeps the $175 option fee.
An option fee is basically paying the seller to take the house off the market so a buyer has time to decide whether or not the home is “the one.”
Q: Who is the Option Fee paid to?
A: The Option Fee should be made payable to the seller(s) and delivered as soon as the contract is executed.
Q: Is a check or money order accepted?
A: Usually, yes. The listing agent and/or seller will determine the preference. Some agents will also accept cash on behalf of their clients. A receipt should be signed and provided for proof of payment.
Q: When will the Option Fee be cashed or deposited?
A: The Option Fee should be delivered to the listing agent or directly to the seller within three days from the effective date of the contract. The seller may cash or deposit the funds at any time after receiving it.
Q: What happens if I can’t deliver the Option Fee within the 3 days?
A: If the Option Fee is not delivered to the Seller or his/her agent within the 3 days from the effective date of the contract, you forfeit the right to terminate the contract for any reason. You will not have an effective Option Period.
Q: What happens to the Option Fee if I cancel the contract during my Option Period?
A: The seller retains the fee for allowing the Option Period.
Q: What happens to the Option Fee if I choose to close on the home?
A: In the earnest money contract, a buyer may request to have the Option Fee credited back to the buyer on closing and funding.
Q: Do I have to give a reason why I’m terminating during the Option Period?
A: Absolutely not! Although your reason can help ease a seller’s curiosity, if you’ve paid for the right to back out for ANY or NO reason, the disclosure is completely up to you.
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