What is a Real Estate Option Period

An option period is a specified time frame in a real estate contract which allows a buyer to terminate the contract for any reason. It creates the right to terminate within the specified number of days for a specified price. Our Texas promulgated contract states it must be paid within two days of the effective date of a contract. Paying for an option period is one of the most important things one can negotiate within a real estate contract because one can have a home inspected, negotiate repairs, and shop for home insurance within the specified days.

Option periods are a wonderful security for buyers because one can terminate for ANY reason within the option period without risking earnest money. If one chooses to terminate a contract, the seller has the right to keep the amount paid for the option period (option fee). If the buyer chooses to proceed with the purchase, the option fee may be refunded to the buyer at closing (if the contract was negotiated this way).

Important things to note include the payment terms, which specify that the option period must be received within two days of the effective date of the contract. This means that if the contract is effective on July 1st, one has until July 3rd to ensure the seller has received the option money. Another important item to note is the signature by the seller or the seller’s agent for the receipt of the option fee. If this section is not signed, one may find themselves without an option period. Last but not least is the option period end date. The option period functions on calendar days, not business days. This means that if a contract is effective July 1st, and one has paid $100 for a ten day option period; the right to terminate expires at midnight on July 11th. It is best not to wait until the last minute to negotiate repairs as this only puts pressure on both parties to contractually agree.

If one decides to pay for an option period, the fee is paid directly to the seller. It is always best to pay with a check for proof of payment once cashed. Please note that the seller has the right to cash the check at anytime, even if you proceed with the purchase. Talk with a REALTOR® about an option period and how it can work for you.

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