Putting down too little or forgoing the good faith deposit entirely can even be insulting to a seller or make them think the buyer isnt serious or financially secure. This includes for any reason during the option period, if the seller defaults on the contract, and based on specific contingencies like financing and the home inspection. I will help you narrow your options and find the best neighborhood for you based on your specifications. Often times the renegotiation will include having the seller make the repairs or concessions based on items found in the home inspection. 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. Grant Period From February 23, 2022, to August 31, 2023. What Is an Option Fee? It also compensates the seller for their time as you do your due diligence on the house. The material provided on this website is strictly for informational purposes only and is not intended and should not be considered as legal advice or tax advice. This may include retaining or refunding the earnest money. Be sure to carefully read the language of the contract. The agreed-upon option fee must be paid by the third day of the option period. Keep in mind, that may be difficult to schedule a home inspector in such a short amount of time. The 35 Steps to Building a House: Your Start-to-Finish Guide. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. By interacting with any of our blog posts, you agree to comply with the following terms and conditions: Texas REALTORS, in its sole discretion, reserves the right to remove any content you have uploaded, posted, or submitted onto any of our blog posts if we believe that it violates these terms or conditions. Yes, a Texas real estate contract is still valid even if earnest money is not required or if the buyer has not made the deposit. Find top real estate agents in these similar cities, HomeLight has an A+ rating with the When you are putting down thousands of dollars, you want to know what happens to your deposit if the deal falls apart and how its credited when the transaction closes. In hot markets like Austin, an earnest money amount of 2% or more may be needed to stand out against other offers. If your client wants his back-up contract to last until or beyond the first contract's closing date, you can also ask the listing agent to provide the first contract's closing date. Starts at the beginning of the purchase contract period Requires consideration - a non-refundable fee paid to the seller called the Option Fee. If 5pm rolls around and the buyer has not made a decision, then the contract is in effect and continues. An option period usually comes at the cost of a non-refundable option fee on the buyers side. You must offer something of value if the option and extension periods are to be legally enforceable. Share with your sellers these tips on how to live in a show-ready house Issues Mobilization and Political Advocacy Assessment, TACS Texas Accredited Commercial Specialist, TAHS Texas Affordable Housing Specialist, TRLP Texas REALTORS Leadership Program, TRLS Texas Residential Leasing Specialist, TRPM Texas Residential Property Manager, Sales of Million-Dollar Homes in Texas Report. The cost varies based on the offer from the buyer. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. The Option Fee is provided to the seller as consideration for taking the home off the market during this time. Creekview Realty notes that the option fee is usually $100 and the period is seven to 10 days. If either party prevents the transaction from closing on time, outside of issues the contract specifies allow the closing date to be extended, the non-defaulting party can exercise their rights under Paragraph 15. Most real estate transfer contracts contain an option fee, though it's not a legally binding requirement. Broker: Keller Williams Southwest Starts at the beginning of the purchase contract period. Get answers, ask questions and more. The home-buying process can be overwhelmingeven more so if you rush through it. The term option period is specific to Texas. Typically, you must pay a fee to set up an option period. The buyer has the right to object to the Commitment and Exception Documents within a certain number of days. The earnest money you deposit shows that you have skin in the game too. Unless the contract states otherwise, earnest money is due within 3 days of the contracts Effective Date. Traditionally, the option fee was paid to the seller. (Request a Custom Search), Easier ProcessMoving your family (and possibly changing jobs) is stressful enough. Its unique in a sense that my out-of-state buyers ask about it more than anything else. For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. If the buyer chooses to terminate, the EMD would be refunded, but the seller would retain the option fee. This is often done by paying an additional termination-option fee. I'm always here to help! In the state of Texas, an option period allows a buyer to get these details before making the final choice. This includes weekends and holidays. Before inspections, you may fear the state of the home or the sellers willingness to negotiate repairs if the home needs serious work. Hard To Find Data & Statistics. Yes. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. In Massachusetts, the contingency date is 17 days after acceptance (acceptance referring to the day that the buyer and seller agreed on terms for the contingency period). I know my buyers termination option ends on Thursday, but at what time? An executed contract is one where all parties have signed, initialed & money has been exchanged. As a buyer, you need to make sure you make the most competitive offer you can, while still ensuring youre making a great investment.. Updated January 2023 People always ask me, , I Have the Best HomeSearch Available Yes, I know you can search for homes on the Internet on your own, but no online searches available to the general publicincludingHAR, Trulia, Zillownone of them will allow you todo thecomplicated searchesthat I canperform with my custom home search. (Option fees typically range from $100-$500. 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. Once the inspection is complete and the licensed inspector provides the buyer with the report, the buyer can make a decision to move forward with the purchase, renegotiate the contract, or terminate altogether. Im available any time for a call or chat if you. 6 of the Top We Buy Houses for Cash Companies in Kissimmee, What to Do When You Cant Afford Home Repairs and Need Help, 18 House Hunting Tips From Real Estate Experts, 5 of the Top We Buy Houses for Cash Companies in Amarillo, terminate the sale at any point during the allotted time, "5 Steps to Optimize Your Home Buyers Option Period," Stonebriar Property Inspections (June 2021), "Option Period," Legacy Texas Title (May 2021), "What is an Option Fee in Real Estate?," Close Concierge (July 2021), "Hot Markets, Cool Practices," Texas Real Estate Center (August 2021), "How to Deal With Inspection Reports Provided to a Seller," Texas Real Estate Commission (May 2019), Final negotiated terms between buyer and seller. If you do not exercise your option (and continue the purchasing process), then the option fee is usually applied toward your closing costs. 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. There is no official relationship between Sheila Cox and any properties or neighborhoods described herein (including but not limited to, owners, schools, management companies, HOAs, and associations) or visa versa. An option period gives the buyer a specific amount of time to have the property inspected and decide if they will continue with the purchase. Buyers typically use this time to have the home inspected to make sure there's nothing substantially wrong with the property before they commit to the purchase. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! This requires paying a small option fee. View helpful videos on my YouTube channel, Texas Real Estate Commissions Information About Brokerage Services. d. You will not post any information intended to sell or advertise a business, product, or service. . There are several options for paying Texas earnest money: The title company can choose which funds it accepts. Depending on the local market conditions and norms, the average earnest money amount may be a flat amount such as $500 to $2,000 or a percentage of the purchase price, usually 1% to 2%. However, the transaction is in an option period, or inspection period. You place a cash offer on your new home (using Homewards cash). The number of days and the amount of the option fee, like sales price and earnest money, are among those features negotiated between a seller and potential buyer in the sale contract; in Texas, option fees typically range from $100 to $200, while earnest money ranges from one to several thousand dollars. Generally, the option provides the buyer time to do their due diligence on the property. The first day is the day after the purchase contract is signed by both parties. If there is something I didn't answer for you or if you have additional questions, please reach out to me. If the transaction doesnt close and the deal falls through, do you get your earnest money back? Earnest money contracts are also called option contracts for this reason. You should contact your attorney to obtain advice with respect to any particular issue or problem. Other states use different terminology to refer to this period of time: Once the option period takes effect, the home's status changes from "active" to "option pending." Its at this time that the seller can deny and continue with the contract or the buyer can opt to back out and continue their home search. 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