The revised contract form, which became mandatory in 2021, requires the buyer to deliver the option fee to the title company, not the seller, within 3 days of the effective date. If you exercise your option (and decline purchasing the home), then you lose your option fee ($200-500), but you get your 1% earnest money back. If neither are willing or able to do this, the contract can usually be terminated under the standard property approval contingency which requires the lender accept the property and its appraisal. Youll want to strike a balance by making sure you have enough time to get the information you need, while also finalizing the deal as soon as possible to give the seller the certainty they crave. Option period can be extended, but generally these are due to other factors. 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. 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. . Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. The seller may respond by contesting the release in which case it may go to mediation or before a judge who decides who receives the earnest money. Join the 10,000 agents who already receive our weekly newsletter. Its a good faith deposit that shows serious intent to buy the home. These numbers come from journalists parsing data from across the United States, and they say Texas is one of the most expensive places to divorce. 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. 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. Earnest money is one of many important aspects of a Texas real estate transaction. The option period begins the day after the contract is signed, and both buyer and seller are contractually obligated to carry out those terms. If the transaction doesnt close and the deal falls through, do you get your earnest money back? [The sellers market] is making buyers do everything with haste. This includes weekends and holidays. It provides security for the buyer by giving you the chance to terminate the purchase contract for any reason whatsoever without risking your good faith deposit. You don't want to end up with a house that's not worth the value you paid. All photos, images, and videos on this website are copyrighted and may not be downloaded or reused without the written permission of Sheila Cox. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. When you use our Buy with cash or Buy Before you sell solutions, youll benefit from our Dual Appraisal Advantage. However, the more competitive the real estate market, the more important it becomes. In addition, if you find any defects that you cannot live with, then you must negotiate the repairs, or change in price, before the end of the Option period. No representations or warranties, either expressed or implied, are made to the accuracy of the information herein, or with the respect to suitability, usability, feasibility, merchantability, or condition of any property or neighborhood herein. It provides security for the buyer and the buyer can terminate the. A typical fee ranges between $100 and $500+, determined by the market and negotiated terms, and is due three days after the contracts start date. The median home price in Texas is $420,000. The option period starts the day AFTER the contract is executed. Texas Real Estate Commission Information About Brokerage Services | Texas Real Estate Commission Consumer Protection Notice, Amanda Brown Realty with Coldwell Banker Realty 2021 | Designed and Maintained by Arbor Green Design, Amanda Brown Realty with Coldwell Banker Realty 2021 | Designed and Maintained by, extend the option period with additional compensation, How to Find a Real Estate Agent | First-Time Home Buyer Help, Cedarbrook Ridge Estates: Harker Heights, TX, Estancia West: Upscale Living in Killeen TX, From the Pro: How to Buy Land From a Neighbor, Texas Real Estate Commission Information About Brokerage Services, Texas Real Estate Commission Consumer Protection Notice. In 2018, the Texas Real Estate Commission (TREC) updated its standard Texas real estate contract for residential purchases to clarify when does earnest money need to be deposited. The buyer must submit the TREC Release of Earnest Money form with the contract termination. 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. [citation needed] The Option Period is an important part of a real estate transaction in the state of Texas. The "option" in Texas real estate is an agreed upon number of days in the one to four family residential contract (purchase contract) that allows for the buyer to back out of the contract for any reason. 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. Oops! c. You will not post content or take any action on our blog posts that infringes someone elses rights or otherwise violates the law. a. Be Aware of These 15 Tenant Rights. Note that the inspection contingency is frequently waived in hot markets. NOTE: The $200-400 Option fee is paid directly to the sellerusually via a personal check. The buyer must make a decision no later than 5pm local time of the property. Please share this info with your Friends! If this contingency was waived by the buyer, the deposit is forfeited if financing falls through. By paying this fee, you're purchasing the right to back out of the purchase for any reason during the option period. During the option period in Texas, the home status changes from active to option pending, and the seller cannot sell the property to another buyer during that time, although they can take backup offers. Use TRECs Amendment to the contract (TXR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. Theres going to be multiple offers, and to be the best, you need to move rapidly, Bacak shares. I will help you narrow your options and find the best neighborhood for you based on your specifications. The Option Fee may or may not be credited to the buyer'scosts at closing. When buying a home in Texas, you should make the most of this time to ensure the property doesnt have any major issues. The purpose of having a home inspected is to ensure that there are no significant flaws in the property before committing to purchasing it. There is often a nonrefundable option fee (typically around $100) paid by the buyer that is usually applied to closing costs if the buyer decides to move forward with the purchase. This is when a home inspection will occur. Across the United States, due diligence is probably the most common name for an option period, but you may also hear it referred to as the inspection period or contingency period. As one, Transaction coordinators play an important role in the real estate industry. But be warned: Every option period and extension comes at a price. It gives you the right to terminate the contract without losing your Earnest Money Deposit. The option period is based on calendar days, not business days, and it begins on the next full business day after the date on the executed contract. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. The option period can also be extended for an agreed-upon number of days. The average earnest money deposit nationwide is 1% to 2% of the purchase price but 3% in California. 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. The Texas real estate contract option period is in place to provide protection to the buyer. In 2018, the Texas Real Estate Commission (TREC) updated its standard. If the buyer in this situation chooses to request an extension of the termination-option period instead of exercising the default remedies available to him in the contract, then he must agree to offer something of value as consideration to the seller to ensure that the extension is legally enforceable. There are some financing situations (i.e. The seller promised to have the utilities on next week, so my buyer just wants to extend the termination-option period another 10 days. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. But for those who terminate, they only lose the option fee. How to Become a Transaction Coordinator in California, Transactly Acquires TC Solutions, LLC Further Expanding National Network of TCs. Creekview Realty notes that the option fee is usually $100 and the period is seven to 10 days. 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. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. Need a painter, electrician, mover, insurance company, etc.? However, this doesnt spell the end of your dream home journey. Financing contingencies and appraisal contingencies are separate from the option period but the only way for a buyer to get the option fee returned to them, is if they close the sale, according to Bacak. or the buyer backs out with cause allowed in the contract. Think of it like home-purchase insurance for the buyer. The inclusion of the option fee often makes the idea of an option period more palatable to a seller theyll lose a few days if you walk away, but theyll keep your option feebut its still a small amount of money compared to actually selling the property. If there is something I didn't answer for you or if you have additional questions, please reach out to me. 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 With so many contingencies, communications, and deadlines to manage in even a simple real estate transaction, its easy for real estate agents to get overwhelmed. In other states, you can include contingencies in your offer and make sure theyre addressed before closing day. Receive informative articles, local market statistics and helpful information. The home-buying process can be overwhelmingeven more so if you rush through it. How do we do that? 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. An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. You may be unfamiliar with the term option period, which is understandable as the phrase is specific to the Lone Star State. Better Business Bureau. Typically, you must pay a fee to set up an option period. Thats because option periods are called different things in different places. Remember that the good faith deposit is not necessary to make the contract binding. In most places, you should put down a percentage. Call Me 832-939-1701. They support agents by taking time-consuming, detail-specific, and deadline-oriented tasks related to contracts off of their plates. Having trouble understanding how an option period works in the state of Texas? On average, a Texas divorce without children costs about $15,600, and one with children costs about $23,500. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. In a hectic, fast-paced, and emotionally overwhelming market, this time gives the buyer space to breathe and evaluate both the condition of the home and the costs of moving forward. In a perfect world, the information you gather in the option period makes you more confident about moving forward. Killeen, TX 76549, Gatesville, Harker Heights, Temple, Nolanville, Killeen, Belton, Salado, Copperas Cove, Lampasas, Kempner, McGregor, Valley Mills, Lorena, Woodway, and Evant. The chief benefit of the option period is it allows the homebuyer time to determine if they want to move forward with the purchase. 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 seller with multiple offers wants the best price in the shortest amount of time. Austin has a median home price of $656,000 thats $6,500 to $13,000 to put down 1-2% as a good faith deposit! However, Sheila Cox and Keller Williams assumes no liability or damages due to typos, errors or omissions. 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. Your lender will use the results of the appraisal to determine how much money theyre willing to lend you for the property., Today there is an appraiser shortage so most homebuyers arent able to get an appraisal during the option period. Reverse Mortgage Pros and Cons from a Financial Planners Perspective, 11 Questions to Ask When Buying a New Construction Home. Im going to , EVERYTHING YOU WANT TO KNOW ABOUT SUGAR LAND TEXAS, 1650 Highway 6, #350, Sugar Land , TX 77478 (, Ultimate Guide to Sugar Land Texas Save Time & Effort, Hows the Market in Sugar Land Texas? 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. You will not post any defamatory, discriminatory, libelous, threatening, vulgar, sexually explicit, abusive, profane, rude, or obscene content (including comments); b. To get the privilege of having an option period as a homebuyer, youll pay an option fee to the seller. There are a few items to consider when negotiating the timeframe: You can skip the option period, and thats another way to make your offer appealing. As of January 2016 the option period time ends at 5 p.m. on the final day of the period. require longer option periods. During this time period, a home buyer will want to complete any desired home inspections (general, architectural, foundation, pest, etc.). Earnest money is not required to make a valid Texas real estate contract. During the Option Period, the buyer can terminate the contract for any . An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. 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