The Option Period in Texas serves as a security blanket of sorts for home buyers. It is a set number of days in a real estate contract that the buyer can choose to cancel the contract within. The contract can be ended for a certain price without the risk of losing the earnest money deposit. The Texas Real estate Option Period is extremely convenient for many reasons. It provides the buyer with security, can be extended if agreed upon by both the buyer and seller, ends at 5 p.m. local time, needs consideration, and begins at the same time as the purchase contract period.
It Has a Flexible, but Set Length
The length of the option period is negotiable, but usually, it ranges from between 1 to 10 days. The buyer has this time to complete tasks such as home inspections. If damages or repairs need to be done, the option period also gives the buyer time to get repair estimates or negotiate the contract further if necessary. This time allows the buyers to pull out of the contract if they are not happy with the condition of the property after conducting the inspections.
The Option Period starts the day after the effective date of the contract. For instance, if the parties execute the contract on November 7th, then the Option Period begins on November 8th. Additionally, if the buyer decides to pull out of the contract they must tell the seller by 5 p.m. on the day that the Option Period ends.
The Option Period also requires a negotiable Option Fee to be paid. The Option Fee must be paid by 11:59 p.m. on the third day following the effective date of the contract. There is the option to credit the fee to the buyer’s cost when closing on the home. If the buyer for any reason chooses to cancel the contract during the option period, the seller gets to keep the amount paid for the Option Period.
Option Pending Status on the MLS
Once the Option Period begins, the status of the home on the MLS is changed. It goes from “Active” to “Option Pending”. This keeps other prospective home buyers from making offers or buying the house. The Option Fee is necessary due to the fact the home is being taken off the market, so the sellers are losing other potential buyers during this time, should you decide to terminate the contract for any reason.
Potential for Option Period Extension
It is possible to extend the length of the Option Period once it has already started. However, it must be a mutual decision for both the buyer and seller. The buyer is expected to pay an additional amount for the Option Fee if the Option Period is extended.