An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. For example, if the contract is executed on July 15th, the option period then begins on July 16th. Your Texas divorce costs are influenced by complexity (including children . from Transactly who will handle all the paperwork and deadlines for you for a low flat fee! At 5:00 p.m. on the last day of the Option period, if you have not had the Seller sign an Amendment agreeing to price modifications or repairs, then you are buying the home as is. Make sure you get your inspection reports several days before the end of the Option so you can review them and discuss with your agent and have time to submit an Amendment to the Seller. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! Use TRECs Amendment to the contract (TXR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. The length of the option period is negotiable and it may be as short as 5 days. But dont be confused the fee is also a win for buyers whether or not they back out! Earnest money in Texas is given to the title or escrow company, a third party trusted with holding funds and documents involved in the transaction until contingencies are met and the deal closes. She has published content on The Balance, The Balance SMB, Thrive Global, and other smaller publications on topics ranging from personal finance and entrepreneurship to lifestyle and real estate. The typical option fee in Texas is $100 with a 7- to 10-day option period. In Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. There is no official TREC release of earnest money form. As a buyer, the option period allows you to include contingencies in your offer and address any concerns you might have before finalizing the contract. In a sellers market, offers with option periods might lack a bit of appeal to a seller with a lot of interested buyers. This is when I triple check taxes, schools, aerial maps, sex offenders in the area, flood zones, etc. I have the expertise to help solve complicated problems that often occur in the process. or the buyer backs out with cause allowed in the contract. Home | FAQ | Blog | Mortgage Calculator | VA Loans | Terms of Use | Privacy Notice, 2710 S Clear Creek Rd Ste 115 Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. When does the option period start? Reverse Mortgage Pros and Cons from a Financial Planners Perspective, 11 Questions to Ask When Buying a New Construction Home. If youre not from Texas, you may have never heard of an option period. By interacting with any of our blog posts, you agree to comply with the following terms and conditions: Texas REALTORS, in its sole discretion, reserves the right to remove any content you have uploaded, posted, or submitted onto any of our blog posts if we believe that it violates these terms or conditions. If an appraisal comes in too low, and appealing it doesnt work, the buyer must pay the difference or the seller must drop the price for the deal to close. for residential purchases to clarify when does earnest money need to be deposited. If the buyer terminates the contract, the seller can often keep the earnest money. The chief benefit of the option period is it allows the homebuyer time to determine if they want to move forward with the purchase. A typical option period is anywhere between 1 and 10 days but is dependent on several factors. If the buyer terminates the contract, the seller can often keep the earnest money. If the inspection is completed within the option period, the buyer can walk away without penalty. However, there's an extension when the deadline is on a weekend or holiday. As of January 2016 the option period time ends at 5 p.m. on the final day of the period. The earnest money will be returned to the buyer, but the option fee is forfeited to the seller. Get started with a dependable Texas transaction coordinator from Transactly who will handle all the paperwork and deadlines for you for a low flat fee! Excess screen time can lead to exhaustion and stress. We researched the details and talked with an expert Texas real estate agent to help you make the most of an option period. If your client wishes to terminate under Paragraph 5B, the Termination Option Paragraph, she must provide notice to the seller by 5 p.m. local time where the property is located on February 1. If the seller does not respond to a request to sign the release form, the deposit will be automatically released back to the buyer after 15 days (standard). The Texas Real Estate Option Period: If a buyer decides that he/she wants the Option Period written into a real estate contract, it is usedsolely to have the option to exercise the right to terminate the contract for any reason whatsoever without risking the earnest money deposit. Excess screen time can lead to exhaustion and stress. This includes for any reason during the option period, if the seller defaults on the contract, and based on specific contingencies like financing and the home inspection. To ensure the extension of the option period is valid, be sure to include an amount the buyer has paid seller for the additional option fee. Buyers typically use this time to have the home inspected to make sure there's nothing substantially wrong with the property before they commit to the purchase. While including an option period is a common practice in Texas real estate, its not a mandatory requirement, explains Collins. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. If youre ready to take the next step toward homeownership, chat with a radius loan officer today to discover your options. Extensive case law in Texas suggests a termination-option period cannot be extended without an additional option fee, so a buyer should pay another option fee to reliably extend the option period. Traditionally, the option fee was paid to the seller. So you must be ready to get your inspections ordered ASAP. While this period can last anywhere from a few days to a few weeks, Redfin reports that a typical option period is between one and two weeks long.. The buyer also has the option to ask the seller to make repairs or reduce the purchase price. 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. Yes, a Texas real estate contract is still valid even if earnest money is not required or if the buyer has not made the deposit. (Request a Custom Search), Easier ProcessMoving your family (and possibly changing jobs) is stressful enough. Learn everything you need to know about the home-buying process. Share insights and experience. Thebuyer 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 buyer can request this form be signed if they wish to back out with cause or if the seller has defaulted on the contract. This option period is usually 7 to 10 days, and you have the right to back out of the contract for almost any reason before it ends. The option period is crucial for the buyers process; it creates time for making one of the biggest decisions in a homeowners life. In 2018, the Texas Real Estate Commission (TREC) updated its standard. [The sellers market] is making buyers do everything with haste. There are over 100 tasks that I perform for you during the purchasing process. Texas REALTORS is committed to advocating for a strong real estate industry, advancing a culture of continued learning, and staying ahead of issues concerning members and their clients. However, Sheila Cox and Keller Williams assumes no liability or damages due to typos, errors or omissions. Tell me exactly what you want, and I can narrow down your options better than any search you have access to. With this acquisition, Transactly further expands their. The standard contract now states: Within 3 days after the Effective Date, Buyer must deliver $__ earnest money to __, as escrow agent, at __.. The standard form most agents use is the TAR Release of Money Texas form. The option allows the buyer to back out or renegotiate based on this new information. If neither party wishes to, the contract is terminated and the deposit is refunded to the buyer. It also compensates the seller for their time as you do your due diligence on the house. My client wants to submit a back-up offer on a property thats already under contract. What is an option period? If the contract has a financing contingency, the buyer can have the deposit refunded and be released from the contract by completing the Release of Earnest Money TREC form. The cost varies based on the offer from the buyer. Communication. (During this time, the Seller cannot back out of the contractonly the Buyer has that right.). Very important! All information on this website is subject to change and should be independently verifiedespecially before making decisions based on this information. The buyer may back out of the purchase of the home. Find top real estate agents in these similar cities, HomeLight has an A+ rating with the 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. Otherwise, the buyer risks default under the contract if he fails to close because the sale of . Purchasing a house is an extraordinary financial investment, and a change of heart could significantly impact your finances. The option period begins on June 3rd. My buyer client is on the eighth day of his 10-day termination-option period, and the seller still hasnt turned on the utilities to allow the buyer to have the property inspected. Any legal or other information found on this page or at other sites to which we link, should be verified before it is relied upon. 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