Helpful Information for Buyers,
Sellers and Agents.
How the Option Period Affects Buying and Selling a Home
What is an Option Period?
An Option Period is established in a real estate contract to provide a specified number of days for the buyer to terminate the contract and be refunded their earnest money.
What is the purpose of the Option Period?
It gives the buyer time to complete inspections and appraisals, to get estimates for repairs, to negotiate adjustments to the contract, and to get approved for financing when applying for a mortgage. The buyer pays a non-refundable fee to the seller, called an Option Fee, which is the charge for this review period, which typically less than $1,000.
In Texas, the Option Period is typically between 1 and 10 days. The first day is the day after the purchase contract is signed by both parties. It ends at 5pm on the specified end date. In certain cases the buyer can negotiate with the seller to extend the Option Period.
During the Option Period, the buyer can terminate the contract for any reason without the risk of losing their earnest money. This is why the Option Period is a limited amount of time.
How Does The Option Period Impact Buying and Selling Texas Homes?
During a hot real estate market, a seller may reduce the number of days in the Option Period as much as possible while still giving the buyer time for inspections. The reason is that fewer buyers will consider a home after it is under contract, even if it is within the option period.
To reduce the stress of the option period, it is helpful for buyers to get pre-approved for home financing. Additionally, buyer agents can help provide resources for home inspection and appraisal to expedite those processses to ensure they are completed within the option period. Sellers can proactively make repairs to their property to reduce that uncertainty.
The information in this article is not intended as legal advice.