The Option Period: What is it?
The Option Period Explained:
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. This option, when written into a real estate contract, creates the right to terminate the contract within a certain number of days for a specified price without risking the earnest money deposit. The Texas Real Estate Option Period:
Provides security for the buyer.
Has an agreed-upon number of days.
Starts at the beginning of the purchase contract period
Requires consideration - a non-refundable fee paid to the seller called the Option Fee.
The property will be placed in OP (option pending) status in the MLS.
Ends at 5 p.m. local time.
Can be extended by mutual agreement of the buyer and seller.
What the Option Period does and what is specifically involved:
Provides security for the buyer.
If a buyer decides that he/she wants the Option Period written into a real estate contract, it is used solely to have the option to exercise the right to terminate the contract for any reason whatsoever without risking the earnest money deposit.
Has an agreed-upon number of days.
The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. During this time period, a home buyer will want to complete any desired home inspections (general, architectural, foundation, pest, etc.). If these inspections result in potential home repairs, the option period also provides time for repair estimates to be obtained and any additional contract negotiations (due to needed repairs) finalized. The buyer may decide to exercise their right to terminate if they are not satisfied with the condition of the property after receiving the report(s).
The Option Period starts at the beginning of the purchase contract period.
The option period begins the day after the effective date of the contract. For example, all parties execute the contract on June 2nd. The option period begins on June 3rd.
Requires consideration - a non-refundable fee paid to the seller called the Option Fee.
The Option Fee amount is negotiable.
The Option Fee is given (hand-delivered or mailed) to the seller (or seller's agent) at the beginning of the contract period.
The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4.
The Option Fee may or may not be credited to the buyer's costs at closing.
If the buyer chooses to terminate the contract during the option period, the seller has the right to keep the amount paid for the option period.
The property will be placed in OP (option pending) status in the MLS.
During the Option Period, the property will be removed from 'Active" status and placed in "Option Pending" status in the MLS (Multiple Listing Service). This will prevent other potential buyers from viewing and making offers to purchase that home. The Option Fee is provided to the seller as consideration for taking the home off the market during this time.
Ends at 5 p.m. local time.
If a buyer wishes to terminate the contract during the Option Period, he/she must notify the seller by 5 p.m. local time (where the property is located) on the day that the Option Period ends.
Can be extended by mutual agreement of the buyer and seller.
For additional consideration, the Option Period may be extended by the buyer for an agreed-upon number of days. It is important that the additional fee obtained by the seller to extend the option period is more than a symbolic gesture. Extensive case law in Texas suggests that the buyer must offer something of value to the seller to ensure that the extension is legally enforceable. For example, a court may find that $1 does not satisfy legal requirements.
