As mentioned, the option starts the day after the contract is executed and ends on the date specified in the contract. 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. 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). Generally, the option provides the buyer time to do their due diligence on the property. Very important! You may need to pay a secondary option fee to get the seller to concede. (Also see Pricing a Home Correctly), Best Home SearchesYes, you can search on your own, but no other home search available can filter down to the school leveland filter out the subdivisions that may be known to flood. In Texas, the Option Period is typically between 1 and 10 days. 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 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. Youre able to make a more competitive offer with confidence.. What Is an Option Fee? An option period is an agreed-upon period of time, after the buyer and seller have signed the real estate contracts, during which the buyer can terminate the contract for any reason without risking their earnest money. All information on this website is subject to change and should be independently verifiedespecially before making decisions based on this information. The Texas Real Estate Commission revised its contracts effective January 1, 2016, to implement this time deadline. An option period favors the buyer much more than the seller. It works the same way with either program:, Traditionally, homebuyers have had to choose between moving quickly and having peace of mind. 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. Any legal or other information found on this page or at other sites to which we link, should be verified before it is relied upon. (Option fees typically range from $100-$500. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. Shes worked in the mortgage industry since 2019 and holds a BA in Communications from California State University, Monterey Bay. Network of ExpertsMy network of experts can make your transition to the area as smooth as possible. Leaving it blank or putting zero dollars may lead to an unenforceable amendment. The 35 Steps to Building a House: Your Start-to-Finish Guide. What date should I put here? If you waived this contingency, you will need to surrender the deposit if you cannot fulfill the contract due to financing. The standard contract now states: Within 3 days after the Effective Date, Buyer must deliver $__ earnest money to __, as escrow agent, at __.. Communication. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. c. You will not post content or take any action on our blog posts that infringes someone elses rights or otherwise violates the law. Equal Housing Opportunity Disclaimer: All information on this site is subject to change and should be independently verified. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. The. Need a painter, electrician, mover, insurance company, etc.? For example, a court may find that $1 does not satisfy legal requirements. Having trouble understanding how an option period works in the state of Texas? 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. My team of experts is ready to help you achieve your goals. . Find real estate questions & answers. This 3-day deadline is extended is extended to the next business day when the earnest money due date falls on a legal holiday or weekend. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. 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. It depends on how long the back-up buyer wants to stay in the back-up position. This fee makes the option period more worth a sellers time. With so many factors to consider and so much money at stake, the option period is a great way to protect yourself. They won't, however, get their option fee back. Excess screen time can lead to exhaustion and stress. Buyers & Agents: Be Careful About Wire Fraud! . This is the extra due diligence I do for you, to make sure that you are getting a great home. Buyers anxieties are put at ease when they realize how beneficial this is to them as the buyer. 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. Phone: (832) 779-2890. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4. A great real estate agent can help a buyer navigate the option period and make the most of it. If you use a check, the funds must clear before the earnest money is considered deposited. Sellers expect to see an option period in a residential real estate contract, but generally speaking the longer the option period is, the less competitive your offers is. If you purchased a home in Texas then youre familiar with the Texas real estate contract option period. The buyer can terminate the contract during the option period for virtually any reason. Accurate description. Earnest money in Texas is a seemingly simple line item, but failure to meet specific deadlines can easily cause a deal to fall apart or worse lead to a buyer losing their earnest money or even facing damages. Requires consideration - a non-refundable fee paid to the seller called the Option Fee. But that gives me pause as an agent because its very risky, Bacak shares. This fee makes the option period more worth a seller's time. If a buyer wishes to terminate the contract during the Option Period, he/she must notify the seller by 5 p.m. local time (where the property is located) on the day that the Option Period ends. (Option fees typically range from $100-$500. Both the option periods fee and duration are negotiable. The option period is crucial for the buyers process; it creates time for making one of the biggest decisions in a homeowners life. An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. Its a great tool for buyers to use to negotiate additional terms of the contract, or they can back out. 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. 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? If a third party such as the buyers agent deposits the funds on behalf of the buyer, Texas escrow rules require they sign a Third Party Deposit form. A typical fee ranges between $100 and $500+, determined by the market and negotiated terms, and is due three days after the contract's start date. If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here. Any reason is valid to change your mind during an option period the only thing were risking is our option fee, shares real estate agent Jennifer Bacak, who sells homes 47% faster than the average agent in Bryan,Texas. Don't overlook the importance of the option period. The option period begins on June 3rd. While there is not a set duration for the option period, typically they range from 7-10 days on average. Agents need to be careful about calculating this due date. Real estate is a huge financial and legal commitment. This form must be signed by the seller and buyer and delivered to the title company. Be sure to carefully read the language of the contract. If your client's ability to perform under a contract (i.e., close the transaction) is contingent upon the closing of another property, the Addendum for Sale of Other Property by Buyer (TAR 1908, TREC 10-6) should be made part of the contract. Think of it like home-purchase insurance for the buyer. Work with an expert buyers agent to help you understand this key purchase contract component, so you have the time you need to make your decision. Like (5) Dislike. Im available any time for a call or chat if you. Free shipping for many products! and delivered to the title company. The standard form most agents use is the. Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. Whichever name is used, know that its referring to the same thing: a finite period of time designed to give you peace of mind as a homebuyer. A wire transfer is the most common and safest way to make your good faith deposit. 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. Option period can be extended, but generally these are due to other factors. 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. As of June 2022, the median sales price in Travis county was $665,000. Well, that angst multiplies 10 times when committing to a home purchase, and youll need extra time (and extra details) to feel confident in your decision. hbspt.cta._relativeUrls=true;hbspt.cta.load(7043426, '1d20d9bc-09e0-4630-9baa-430ec5a1c064', {"useNewLoader":"true","region":"na1"}); In Texas, the option period begins the day after the contracts are signed. DOWNLOAD The purpose of this grant is to improve educator quality and effectiveness by offering financial support to educator preparation programs that would like to explore and/or pilot an educator certification assessment that is performance-based, content-specific, and grade-band specific in the form of funds for the purchase of exam vouchers. Copyright 2021 Sheila Cox. How Soon Can A Mortgage Be Refinanced After You Buy? Plus, my proprietary House Report (see sample) includes the data and information you need to ensure that you are making great home purchase. from Transactly who will handle all the paperwork and deadlines for you for a low flat fee! In fact, some modestly priced homes only include option fees of $100. This is the same deadline as the earnest money deposit. But dont be confused the fee is also a win for buyers whether or not they back out! Once the seller accepts your offer, they take their home off the market and do not entertain other offers. 1650 Highway 6, #350, Sugar Land , TX 77478 (Map) The termination option ends at 5 p.m. local time to where the property is located. The purpose of having a home inspected is to ensure that there are no significant flaws in the property before committing to purchasing it. Option Period: What Is It When Buying A Home. . A home purchase isnt something you want to rush into. If there is something I didn't answer for you or if you have additional questions, please reach out to me. Get more done faster with Transactly - a platform for real estate agents that connects you with tech-enabled transaction coordinators. This option period is usually 7 to 10 days, and you have the right to back out of the contract for almost any reason before it ends. The buyer has the right to object to the Commitment and Exception Documents within a certain number of days. Elsewhere, the number of days could be shorter or longer than 17, but across the board, the contingency period ends when the buyer submits a contingency removal form. 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. As the buyer, it's important to note that the option and extension fees are more than a symbolic gesture. It is almost like an undo button. The buyer must submit the TREC Release of Earnest Money form with the contract termination. 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. 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. In the state of Texas, an option period allows a buyer to get these details before making the final choice. If you dont know what you want, the line disappears too quickly. You (the buyer) and the seller agree on the length of the option period as one of the terms in your contract. Any and all inspections that you want to have done to the home must happen before the end of the Option period. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. Sellers are free to reject offers that include option periods or to make counter offers without option periods. In Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. The buyer can take advantage of this option to complete a few checks for their peace of mind. Texass option period is not mandatory and could affect a buyers offer being accepted as the seller could view it as inconvenient. a. Share insights and experience. The earnest money will be returned to the buyer, but the option fee is forfeited to the seller. Bacak explains, The more option money you put down, the better as it shows the seller youre invested and wont terminate.. 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. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. How much will my adjustable rate mortgage payments be? What is an option period? 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. 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! Once it is received, the earnest money will be released back to the buyer. . Heres what agents and buyers need to know about earnest money in Texas including guidelines on the typical Texas earnest money amount and when it must be deposited. The Texas real estate contract option period is in place to provide protection to the buyer. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. The non-refundable fee is paid to the seller (usually about $100). 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. 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. Applicability of the legal principles discussed in this material may differ substantially in individual situations. The option period begins the day after the contract is signed, and both buyer and seller are contractually obligated to carry out those terms. Dont you deserve to have a Five-Star real estate agent on your side? Its the last day of my buyers option period. Having a strong case for extension, such as needing additional time for a specialty inspection, is a good negotiation tool. Earnest money is one of many important aspects of a Texas real estate transaction. Earnest money is refundable, and it's paid to the escrow agent to hold in escrow, not to the seller. 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. Buy your first home this year: Perform a Financial Checkup Yes. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. Traditionally, the option fee was paid to the seller. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! The standard form most agents use is the TAR Release of Money Texas form. It's also home to The University of Texas' main campus. An executed contract is one where all parties have signed, initialed & money has been exchanged. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. 5.0. If for whatever reason within the option period outlined in the contract the buyer wants to terminate and back out of the contract, they can do so. Something went wrong while submitting the form. The option period can also be extended for an agreed-upon number of days. For example, states such as North Carolina and Georgia have a due diligence period that works in a similar way. 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. That means it will go toward closing costs and/or your down payment. I am the local neighborhood expert who can give you a professional and accurate Current Market Analysis (CMA) to tell you what your Sugar Land home is worth today. (View helpful videos on my YouTube channel). Be among the first to hear about upcoming events, industry insights, expansion announcements, and more. An option period is a portion of time, agreed upon between buyer and seller, which permits the buyer to think on a purchase decision. or the buyer backs out with cause allowed in the contract. How much earnest money is required in Texas? 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. Want to learn more about everything that goes into the home-buying process? for residential purchases to clarify when does earnest money need to be deposited. 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. Thats because option periods are called different things in different places. In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . I hope this answered your question- "What is the Option Period in Texas?" The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. Therefore, we promote stricteditorial integrity in each of our posts. 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. Arbor Green Design is not a real estate agent, broker, or associated with any real estate team in the State of Texas or any other state. If you are an HAR Account subscriber or a member of HAR, please click, -------------------------------------------------. Unless the contract states otherwise, earnest money is due within 3 days of the contracts Effective Date. Are due to other factors you may need to be returned to the seller doesn & # x27 ;,! Bacak explains, the option period typically lasts between 7-10 days, the funds clear... You can not fulfill the contract, or they can back out Texas form anxieties are put at ease they. Within a certain number of days electrician, mover, insurance company, etc. the HOWS the LAND. Hear about upcoming events, industry insights, expansion announcements, and.! Your first home this year: Perform a financial Checkup yes buyers process ; it creates for! A financial Checkup yes make sure that you are ready to purchase specific. 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