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Option Period: A Simple Guide

Sep 26, 2016

What is an Option Period?

An Option Period is a specified number of days during which the buyer has the right to have the property inspected and can cancel the contract for any reason. The Option Period can be “bought” for a fee known as the Option Fee in which the amount can be negotiated between the buyer and seller.

Here’s what you need to know:

  • Option Period is a number of days negotiated between the buyer and the seller.
  • It occurs following execution of a purchase contract.
  • The Option Fee can be applied towards closing cost if agreed upon.
  • The Option Fee is usually given in the form of a personal check, either directly to the seller or to the seller’s agent.
  • The Option Fee must also be delivered within 48 hours (not excluding weekends).
  • The Option Period may be extended by mutual agreement between the buyer and seller, but the seller can ask for an additional Option Fee
  • The Option Period is negotiable, but should be long enough to allow the property to be inspected and to negotiate repairs.

Source: http://findrealaustin.com/real-tips/option-period-texas-real-estate-explained.htm/

 

FAQ

Q. Do I have to have an Option Period?

A. No, an Option Period is not required if you are 100% sure that you want to purchase the property (typically seen witha land purchase). However, you can buy an Option Period and if inspections are done quickly and you would like to move forward, then the you may decide to opt-out of the Option Period early. A buyer could ultimately close on the property sooner if this route is chosen. However, if the buyer wants to eliminate risk, and have the property properly inspected, it is best to stick to the negotiated Option Period.

Q. What processes should take place during my Option Period?

A. After you receive your inspection report, you and your buyer’s agent must list the repairs you or your lender require and send over an amendment to the listing agent. With FHA and VA loans, there are some repairs that sellers are required to fix by law.Next, you and the seller, by way of your agents, will negotiate the amendment.  You can also shop for home insurance during these days. 

Q. I am on the eighth day of my 10-day termination-option period, and the seller still hasn’t turned on the utilities to allow me to have the property inspected. The seller promised to have the utilities on next week, so I want to extend the termination-option period another 10 days. Will I have to pay another option fee even though the extension is because the seller breached the contract?

A. Yes. If you choose to request an extension of the termination-option, then you must agree to offer something of value as consideration to the seller to ensure that the extension is legally enforceable. This is often done by paying an additional termination-option fee. A buyer should pay another option fee to reliably extend the option period.

Q. Does a buyer have to complete the inspections before the option period is up?

A. No. However, in most cases, the buyer will want to complete the inspection within the option period in order to have the ability to terminate the contract if they are not satisfied with the condition of the property after the report is received.

Q. I know what day my termination option ends, but at what TIME on that day will it end?

A. According to the Texas Real Estate Commission, which has been recently revised, “The termination option ends at 5 p.m. local time to where the property is located”.

Q. Can my agent just mail the option check to the seller?

A. Yes, but the seller must receive the fee within 48 hours after the effective date of the contract. Therefore, overnight delivery may be necessary to ensure that the buyer has an option period.

Q. As the buyer, am I allowed to terminate during the option period even after the seller has started making repairs?

A. “Yes. A buyer does not automatically give up the right to terminate the contract under the termination option when the seller agrees to make repairs.” Your buyer’s agent has to give notice to the seller in order to opt-out of the Option Period.

HINT: Option Period is great security for buyers.  A person can terminate the contract for ANY reason during this time period without risking earnest money.  

 

Source: www.texasrealestate.com

Source: http://findrealaustin.com/real-tips/option-period-texas-real-estate-explained.htm/

Source: https://www.biggerpockets.com/blogs/977/7714-what-is-a-real-estate-option-period

 

To learn more about Option Period, contact a Triangle Realty team member! We’re always willing to help a client in any way.

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NCBA - National Cattlemen's Beef Association Convention & Tradeshow
Feb 1-3, 2017
Gaylord Nashville, TN
Click here for more information

Texas & Southwestern Cattle Raisers Convention
March 31 - April 2, 2017
San Antonio, TX
Click here for more information

27th Annual Outlook for Texas Land Markets
April 20-21, 2017
San Antonio, TX

World Championship Ranch Rodeo
Nov 2017
Amarillo National Center, Amarillo TX
Click here for more information
Come see the Triangle Booth!

Farm & Ranch Show
Nov 28-30, 2017
Amarillo, TX
Click here for more information
Come see the Triangle Booth!

Dallas Safari Club Convention
Jan 2018
Click here for more information

Panhandle Groundwater Conservation District Symposium
Spring 2018
Amarillo, TX
Click here for more information

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