All About Option Periods
Let’s talk about Option Periods!
Whether you’re moving to Texas from another state, purchasing for the first time, or just want a refresh if it’s been a while since your last purchase, this episode will help you prepare for your next real estate adventure.
First, let's cover what the option period is for… It is an agreed-upon time between buyer and seller typically the taking place the first few days under contract. The seller will take the property off the market, allowing the buyer to do their due diligence to inspect the property and ensure it is in the condition as expected at the time the contract was executed. It was designed to reduce litagation after closing by giving the buyer time for their due diligence and inspections.
- How long are option periods?
Typically in the Austin area they are 7-10 days long. This can vary depending on the market and the complexity of the house and or deal. When the market was very strong, option periods were typically very short and some buyers chose not to have them at all. When the market is more even or if it is a buyers market the option period might be able to be longer. It is good to get a longer option period if the house is older or it already appears to have bigger issues because it might require more than just a general inspector. You might want a roofer, HVAC contractor, and foundation specialist to see the house.
- What will it cost you?
Typically the cost is more if the timeframe is longer. It also is more if it is a higher priced home. An average option money cost range is anywhere from $350-1000. It really all just depends on the situation.
- How are the days calculated?
The first day of the option period starts the day after the effective date in the contract. It is stated in our contracts currently that it will end at 5 pm on the last day of the option period.
- Is it a good idea not to have an option period?
If you are going to tear down the house and the situation is VERY competitive then “maybe” you don’t have to have one.
- Can a seller refuse an option period?
Technically a seller can deny an option period but a buyer might choose not to get under contract because of it.
- How do you deliver the option period money?
In Texas, we now deliver the option period to the title handling the transaction. It can be taken by check, wired with the earnest money or some title companies have special apps.
- How long do you have to deliver the funds?
The contract states that you have 3 days withing the effective date to deliver the option money to the title company.
- What does “time is of the essence” mean, specifically regarding option funds/period?
It means that you need to get the option money in during the first 3 days or you may not have the right to an option period at all.
- Is the option fee refundable?
No, the option period is not refundable. There is option money and earnest money. Typically the option money is a few hundred dollars and the earnest money is in the thousands. If one were to back out during the option period, then they would get their earnest money back but not their option money.
- Who gets the option money if you close on the property ?
There is a box on the contract on who gets the option money. Typically it is marked that the buyer get the option money if they close on the property.
- Can an option period be extended and how?
If buyer and seller both agree, the option period can be extended. This will require an amendment to extend it and at least $10 give to the seller.
- How do you terminate a contract during the option period ?
One would turn in the termination form within the option period to effectively terminatethe contract.
- Do you have to have a reason for terminating?
During the option period you can back out for any reason. Typically it is due to inspection but sometimes people just change their mind.
Here is a great article to learn more about option periods.
We hope we helped you understand option periods better. Please feel free to reach out to us if you have any questions at all! We are always happy to help.