If you have
bought real estate in Texas then you will already be aware of “option period”
but if you haven’t then this is a must read. Let’s say you have found a home
you want to buy and all the terms have been agreed on. All parties then sign
the real estate contract but before you do that first negotiate the terms of
the option period. This is actually a feasibility period where you get in
people to evaluate the house and the construction and based on their findings
you might either renegotiate the price or can even terminate the contract.
The
option period protects the buyer
During the
option period, the seller cannot enter into a contract with anyone else. The
most important point to note is that the buyer has the complete right to
terminate the contract even without any valid reason. The Earnest Money paid in
at the time of signing the contract gets fully refunded. However, the option
fee is not refundable, though if the deal is gone through with then it can be
deducted from the final cost. During this period the homebuyer generally gets
the home inspected with regards to architectural, foundation, roofing,
plumbing, electric, pests etc.
Major
points of the option period
· Buyer must pay the option fee to the seller within 3 days of the contract being signed
· The option period is generally between 5 to 1o days.
· The option period is based on calendar days and starts on the next business day after signing the contract.
· The option fee in Austin is usually about $100 or $200. However, sometimes it can go up to $5000 depending on the cost of the home you are purchasing or the negotiation terms
· While the Buyer can cancel the contract during the option period, the Seller cannot cancel the contract.
· The option fee must always be paid by check and must be signed in the contract by the Seller or by the Seller’s agent.
· The option fee is not refundable to the Buyer on termination of agreement.
The option to terminate the agreement gets
over at 5pm local time of the agreed on the day. This revision has come into
effect on Jan 1, 2016, by the Texas Real Estate Commission.
The
option period can be mutually extended
Extensive case
law in Texas suggests that an additional termination-option fee must be paid by
the Buyer if the option period is to be extended for an agreed- upon the number
of days. The additional fee cannot be a symbolic $1 as this would not satisfy
legal requirements.