In Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. A buyer can make their offer more appealing to a seller by offering a shorter option period, say 5-7 days. An option fee is a small percentage of the total cost of a home, rarely exceeding $500. Creekview Realty notes that the option fee is usually $100 and the period is seven to 10 days. An option period usually comes at the cost of a non-refundable option fee on the buyers side. For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. By paying this fee, youre purchasing the right to back out of the purchase for any reason during the option period. We implement strict design techniques to achieve WCAG AA compliance. When calculating deadlines for my buyer in the One to Four Family Residential Contract (Resale), should I include weekend days or federal holidays? HomeLight, Inc. 100 1st Street, Suite 2600, San Francisco, CA 94105. Communication. Thats because option periods are called different things in different places. Bacak explains, The more option money you put down, the better as it shows the seller youre invested and wont terminate.. Otherwise, the buyer risks default under the contract if he fails to close because the sale of . For instance, putting $0 in the blank may risk the extension being held unenforceable. Earnest money contracts are also called option contracts for this reason. I see that Paragraph B of the Addendum for Back-Up Contract (TAR 1909) is for the contingency date when the first contract has to terminate or else the back-up contract terminates. The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. Amanda Brown is a licensed real estate agent with the State of Texas. Texas REALTORS provides content through various online platforms, including this blog. NAR offers advice for avoiding wire fraud such as using transaction management software or secure email for all communications. That the lot appraise at the purchase price (if you are buying cash) Releasing earnest money prior to closing can be done by submitting the Texas Release of Earnest Money form to the title company signed by the seller and buyer. The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. Since Paragraph 5A, the Delivery of Earnest Money and Option Fee Paragraph, uses the word within when describing the time period, Day One of the option period is the day after the effective date of the contract. While the option is clearly laid out in the contract, most buyers want to know more about it before they even begin their home search. Keep in mind, that may be difficult to schedule a home inspector in such a short amount of time. Theyll help you understand any concerns or necessary repairs so you can address them with the seller before finalizing your purchase contract., Buying a home is a huge investment and your home inspector is an invaluable member of your team. Find a top real estate agent in your area to help you buy your dream home. Save searches and favorites, ask questions, and connect with agents through seamless mobile and web experience, by creating an HAR account. It can be found in paragraph 23 in the One to Four Family Residential Contract promulgated by the Texas Real Estate Commission (TREC), as seen below. Hows the Market in Sugar Land?, Texas Real Estate Commissions Information About Brokerage Services (click here), Consumer Protection Notice (click here), Agent: Sheila Cox, Realtor Killeen, TX 76549, Gatesville, Harker Heights, Temple, Nolanville, Killeen, Belton, Salado, Copperas Cove, Lampasas, Kempner, McGregor, Valley Mills, Lorena, Woodway, and Evant. During this period, which can be 714 days depending on the contract terms, you can schedule home inspections to ensure that the house is in good condition. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. In hot markets like Austin, an earnest money amount of 2% or more may be needed to stand out against other offers. The option period is a good time to take a breath and review any contingencies before taking the final plunge. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. Its a good faith deposit that shows serious intent to buy the home. A general rule of thumb is the earnest money is refundable to the buyer if the seller terminates the contract or the buyer backs out with cause allowed in the contract. References. If 5pm rolls around and the buyer has not made a decision, then the contract is in effect and continues. As an experienced professional, theyll use their knowledge to help you avoid any major missteps., Home appraisals are typically ordered by your mortgage lender. If a third party such as the buyers agent deposits the funds on behalf of the buyer, Texas escrow rules require they sign a Third Party Deposit form. The Texas real estate contract option period is in place to provide protection to the buyer. Making their services extremely sought after by new and experienced agents alike., Transactly Acquires TC Solutions, LLC Further Expanding National Network of TCs Transactly, a rapidly growing Real Estate Transaction Platform, has announced the acquisition of TC Solutions, LLC based in King County, Washington. The Option Period in Texas is a specified number of days set forth in a real estate contract which allows the buyer to terminate the contract for any reason. You should contact your attorney to obtain advice with respect to any particular issue or problem. After the inspection, your home inspector will issue a detailed report on the condition of your new home. Before inspections, you may fear the state of the home or the sellers willingness to negotiate repairs if the home needs serious work. Agents need to be careful about calculating this due date. Share insights and experience. It's also home to The University of Texas' main campus. or the buyer backs out with cause allowed in the contract. This is compensation for the time and effort theyve wasted and the need to relist their home. Like the Earnest Money Deposit, this fee is a show of good faith meant to demonstrate that youre serious about the purchase. Enhance your real estate experience with HAR App, To post a comment on this blog post, you must be an HAR Account subscriber, or a member of HAR. What is a Kick-Out Clause, and How Can You Avoid It? The purpose of having a home inspected is to ensure that there are no significant flaws in the property before committing to purchasing it. Plus, my proprietary House Report (see sample) includes the data and information you need to ensure that you are making great home purchase. However, the more competitive the real estate market, the more important it becomes. The buyer may back out of the purchase of the home. Applicability of the legal principles discussed in this material may differ substantially in individual situations. The termination option ends at 5 p.m. local time to where the property is located. Traditionally, the option fee was paid to the seller. Don't overlook the importance of the option period. It also compensates the seller for their time as you do your due diligence on the house. For example, if your client's effective date is January 22 with a 10-day option period, the option period will end on February 1. Keep in mind that option periods are specific to Texas and other states will have different processes that give buyers the time they need to make the final decision. Other states use different terminology to refer to a similar period of time typically used for inspections and other contingencies: In many states, contingencies are taken care of before the purchase contracts are signed, which negates the need for a formal option period. If you use a check, the funds must clear before the earnest money is considered deposited. So when you sign the contract to purchase a home, you will give your real estate agent two checks: 1) Option fee check payable to the Seller, and 2) Earnest money (usually 1 percent of sales price) payable to the Title Company. In this example, because Day 3 is a Sunday, the deadline is Monday. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! If neither party wishes to, the contract is terminated and the deposit is refunded to the buyer. If the inspection uncovers serious issues or the seller wont budge on the contract terms, youre free to walk away from the sale without any repercussionsyoure allowed a change of heart. and delivered to the title company. Yes. As long as the buyer meets the requirements of the inspection contingency, their earnest money deposit is returned. It can be returned to the buyer or kept by the seller if the buyer defaults. Since Paragraph 5A, the Delivery of Earnest Money and Option Fee Paragraph, uses the word withinwhen describing the time period, Day One of the option period is the day after the effective date of the contract. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. Equal Housing Opportunity Disclaimer: All information on this site is subject to change and should be independently verified. Yes. We strive to make our website accessible to everyone. An option period is a short window of time after your offer is accepted during which you take a closer look at your new home.If you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit (EMD) back from the seller. Madeline Sheen is an associate editor for HomeLight who works with an amazing team of experts in home buying, personal finance, and mortgage to create articles for HomeLights Buyer Resource Center. This inspection period, also known as the option period, typically lasts anywhere between 5 and 10 days. hbspt.cta._relativeUrls=true;hbspt.cta.load(20424362, 'e9dcb309-7259-4f5d-aa74-c702513a4917', {"useNewLoader":"true","region":"na1"}); Visit https://www.nmlsconsumeraccess.org/to verify UpEquity as a financial services provider.UpEquity is a licensed mortgage company in these states.UpEquity SPV2 LLC DBA UpEquity (NMLS #2101265).Parent company LnderLab, Inc. DBA UpEquity (NMLS #1849773), 3100 Alvin Devane Blvd. Thank you! When buying a home in Texas, you should make the most of this time to ensure the property doesnt have any major issues. Option Period: What Is It When Buying A Home. How Much Does It Cost to Build a House in 2023? If the seller does not deliver the sellers disclosure notice about the property condition within the time specified, the buyer can terminate the contract and have their deposit refunded. The buyer can take advantage of this option to complete a few checks for their peace of mind. . As a good rule of thumb, buyers should be prepared to put down the average earnest money amount Texas sellers expect no more, but definitely no less. The property will be placed in OP (option pending) status in the MLS. The Option Fee is given (hand-delivered or mailed) to the seller (or seller's agent) at the beginning of the contract period. When you write a contract to purchase a home in in Texas, you can buy an "option period" (usually 7-10 days, negotiable) from the seller for $200-$400 (negotiable) that gives you the irrevocable privilege to back out of the sales contract for any reason, and still receive your 1 percent earnest money back. Shorter option periods generally benefit the seller and longer option periods benefit the buyer. . Something went wrong while submitting the form. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. Grant Period From February 23, 2022, to August 31, 2023. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. I'm a home buyer considering using Homeward, I'm a real estate agent representing a customer, a typical option period is between one and two weeks long, assess the fair market value of your potential home, Affiliated Business Arrangement Disclosure. Any reason is valid to change your mind during an option period the only thing were risking is our option fee, shares real estate agent Jennifer Bacak, who sells homes 47% faster than the average agent in Bryan,Texas. Usually on the contract you have 7 to 10 days to complete the inspection. What Documents Will I Need for Taxes if I Bought a House Last Year? It's a good faith deposit that shows serious intent to buy the home. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here. This is where an option period becomes key even if your choice is to back out of a sale, youll feel better having decided that on your timeline. Share with your sellers these tips on how to live in a show-ready house Issues Mobilization and Political Advocacy Assessment, TACS Texas Accredited Commercial Specialist, TAHS Texas Affordable Housing Specialist, TRLP Texas REALTORS Leadership Program, TRLS Texas Residential Leasing Specialist, TRPM Texas Residential Property Manager, Sales of Million-Dollar Homes in Texas Report. The length of the option period and the option fee are negotiable between the buyer and the seller. Im available any time for a call or chat if you. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. Your real estate agent can advise you if your offer has a good chance of being accepted without earnest money, but it may be hard to get your offer taken seriously without putting down a good faith deposit. hbspt.cta._relativeUrls=true;hbspt.cta.load(7043426, 'ab249a57-2fdf-4f5e-83f8-c65c29e9a946', {"useNewLoader":"true","region":"na1"}); Subscribe to the radius blog using the form below. Information you provide when registering will be shared with the account owner and host and can be used and shared by them in accordance with their terms and privacy policy. Typically, anywhere between 5 and 10 days cost to Build a House Last Year connect with through... Kick-Out Clause, and How can you Avoid it fee are negotiable the. This option to complete the inspection and purchase the home needs serious work, say 5-7.. Time with a good faith deposit that shows serious intent to buy the home needs serious work earnest... 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