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. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. At the end of the Option Period (and the timing is very strict) you can do one of the following: Make sure you hire a real estate agent who knows how to properly handle Option Periods and protect your money. Gain access to our suite of customizable marketing assets for agents. and delivered to the title company. The property will be placed in OP (option pending) status in the MLS. It depends on how long the back-up buyer wants to stay in the back-up position. In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . Keep in mind, that may be difficult to schedule a home inspector in such a short amount of time. How do we do that? I can filter out , Accurately pricing a home takes more than a three-minute look at current sales numbers by a computer algorithm. Thinking about buying or selling real estate? For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. By paying this fee, you're purchasing the right to back out of the purchase for any reason during the option period. I will help you narrow your options and find the best neighborhood for you based on your specifications. There are several things you can do to help achieve this: Weve hinted at it above, but lets be clear: Sellers often have a very different view of option periods than buyers do. If you use a check, the funds must clear before the earnest money is considered deposited. A few common contingencies that are often included in real estate offers include: Due diligence is essential when it comes to buying a home. She has 4+ years of writing experience and holds a degree in English Literature from Brown University. require longer option periods. 5.0. VA loans) that require the home to be in a particular condition. Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. Shipping speed. Copyright 2021 Sheila Cox. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. While including an option period is a common practice in Texas real estate, its not a mandatory requirement, explains Collins. As a good rule of thumb, buyers should be prepared to put down the average earnest money amount Texas sellers expect no more, but definitely no less. Buy your first home this year: Perform a Financial Checkup When buying a home in Texas, you should make the most of this time to ensure the property doesnt have any major issues. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. So basically, the termination option is a clause that allows buyers to legally cancel an executed contract. But dont be confused the fee is also a win for buyers whether or not they back out! A typical option period is anywhere between 1 and 10 days but is dependent on several factors. All information on this website is subject to change and should be independently verifiedespecially before making decisions based on this information. You (the buyer) and the seller agree on the length of the option period as one of the terms in your contract. What date should I put here? For example, states such as North Carolina and Georgia have a due diligence period that works in a similar way. If the buyer decides to terminate the contract, they must give written notice by 5 p.m. on the last day of the agreed-upon option period. Having trouble understanding how an option period works in the state of Texas? Earnest money is money put down as a deposit with a Texas real estate purchase agreement. If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here. The termination option ends at 5 p.m. local time to where the property is located. That said, its important to recognize that while paying the option fee and including an option period provides more reassurance, asking for too much time may make your offer less competitive.. How long will it take to pay off my credit card? That is, when all parties have signed and agreed to the contract. Youre able to make a more competitive offer with confidence.. The previous TREC contact stated that earnest money was due upon execution of this contract, a vague deadline that rarely happened. $500 for five days has become my go-to when Im competing with other contracts and low inventory, Bacak explains. In general, the shorter your option period, the more attractive your offer is to the seller. Texas REALTORS is committed to advocating for a strong real estate industry, advancing a culture of continued learning, and staying ahead of issues . In this case, the buyers earnest money is refunded, even after the option period. When a buyer submits an offer on a home they can request an option period in exchange for a dollar amount. This may include retaining or refunding the earnest money. This usually has to be more than a symbolic gesture of $1, but nonetheless compensation. The standard TREC contract has default provisions that allow the seller to cancel the contract if the earnest money is not deposited on time. The buyer would still receive back the earnest money deposit (EMD) placed down at signing, usually between 1% and 3% of the sale price. This option, when written into a real estate contract, creates the right to terminate the contract within a certain number of days for a specified price without risking the earnest money deposit. Contact us today! Oops! Discover Sugar Landand Know What theExperts Know Without Wasting Hours, Days, and Weeks of Time and Effort It doesnt take years to get to know Sugar Landit just takes my free 145+ page real estate guide! 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. Earnest money is not required to make a valid Texas real estate contract. We implement strict design techniques to achieve WCAG AA compliance. or the buyer backs out with cause allowed in the contract. The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. Once it is received, the earnest money will be released back to the buyer. 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 Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. If there is something I didn't answer for you or if you have additional questions, please reach out to me. Rachel Leigh Gross is a freelance writer and editor based in Providence, Rhode Island. Sellers take the dollar amount and the duration in consideration when deciding on which offer to go with. An inspection of a home takes place after a contract has been executed, signed by both the seller and buyer. A buyer can make their offer more appealing to a seller by offering a shorter option period, say 5-7 days. All rights reserved. a. Both the option periods fee and duration are negotiable. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? Tell me exactly what you want, and I can narrow down your options better than any search you have access to. If you made an offer and waived this contingency, you cannot back out of the deal and get your deposit back no matter what the inspection uncovers. For example, some complex properties with lots of systems (septic, a well, a pool, etc.) An executed contract is one where all parties have signed, initialed & money has been exchanged. Im your transaction manager and will guide you, step-by-step, through the process so you never miss an important deadline. This is compensation for the time and effort theyve wasted and the need to relist their home. . 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. At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. [The sellers market] is making buyers do everything with haste. Please share this info with your Friends! 1650 Highway 6, #350, Sugar Land , TX 77478 (Map) Sellers are free to reject offers that include option periods or to make counter offers without option periods. It's a good faith deposit that shows serious intent to buy the home. 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. Buyers & Agents: Be Careful About Wire Fraud! 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. 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. The home-buying process can be overwhelmingeven more so if you rush through it. The option period starts the day AFTER the contract is executed. The buyer may back out of the purchase of the home. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? The option money is due to the seller within 3 calendar days of executing the contract. There is no official TREC release of earnest money form. All days are calendar days. A seller with multiple offers wants the best price in the shortest amount of time. 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. Check out p. 27 regarding the sample Flood Map info I provide. Learn About the Benefits of Owning a Home Versus Renting, HOME BUYING 101|Sep 23, 2020 12:00:00 PM|by radius financial group. View helpful videos on my YouTube channel, Texas Real Estate Commissions Information About Brokerage Services. The option period can also be extended for an agreed-upon number of days. 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. If the inspection is completed within the option period, the buyer can walk away without penalty. Earnest money contracts are also called option contracts for this reason. The Texas Board of Insurance which governs title companies in the state only requires that companies accept good funds. Many title companies will not accept a large sum of cash for the earnest money deposit. In a hectic, fast-paced, and emotionally overwhelming market, this time gives the buyer space to breathe and evaluate both the condition of the home and the costs of moving forward. In a perfect world, the information you gather in the option period makes you more confident about moving forward. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. The median home price in Texas is $420,000. This is when I triple check taxes, schools, aerial maps, sex offenders in the area, flood zones, etc. Whats Your Home Worth in Current Market? Read our Ultimate Home Buying 101 Guide. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! You should contact an attorney or licensed CPA to obtain advice with respect to any particular issue or problem. The buyer can take advantage of this option to complete a few checks for their peace of mind. You may dread the idea of an additional fee, but its worth it. Please note that data on this website is derived from various sources and every effort is made to ensure the accuracy. If youd like more information regarding the Texas option period I would love to hear from you. The length of the option period and the option fee are negotiable between the buyer and the seller. If youre not from Texas, you may have never heard of an option period. While this period can last anywhere from a few days to a few weeks, Redfin reports that a typical option period is between one and two weeks long.. You should contact your attorney to obtain advice with respect to any particular issue or problem. This is often done by paying an additional termination-option fee. Texas REALTORS provides content through various online platforms, including this blog. c. You will not post content or take any action on our blog posts that infringes someone elses rights or otherwise violates the law. During the Option Period, the property will be removed from 'Active" status and placed in "Option Pending" status in the MLS (Multiple Listing Service). 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. After closing on a house in Texas, the earnest money is generally credited toward the purchase of the home. How much earnest money is normal depends on the norm where you live. However, other regions have similar processes that support the buyers decision. A home purchase isnt something you want to rush into. hbspt.cta._relativeUrls=true;hbspt.cta.load(20424362, 'e9dcb309-7259-4f5d-aa74-c702513a4917', {"useNewLoader":"true","region":"na1"}); Visit https://www.nmlsconsumeraccess.org/to verify UpEquity as a financial services provider.UpEquity is a licensed mortgage company in these states.UpEquity SPV2 LLC DBA UpEquity (NMLS #2101265).Parent company LnderLab, Inc. DBA UpEquity (NMLS #1849773), 3100 Alvin Devane Blvd. When you use our Buy with cash or Buy Before you sell solutions, youll benefit from our Dual Appraisal Advantage. I hope this answered your question- "What is the Option Period in Texas?" An option period can be extended if the seller agrees. 5.0. This form must be signed by the seller and buyer and delivered to the title company. They won't, however, get their option fee back. For a seller, the goal is usually to lock in the best offer on their property as soon as possible. The Texas real estate contract option period is in place to provide protection to the buyer. 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. 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). You must offer something of value if the option and extension periods are to be legally enforceable. However, its usually expected by sellers and an offer may not be accepted without it, especially if there are multiple offers. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. However, the more competitive the real estate market, the more important it becomes. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. However, Sheila Cox and Keller Williams assumes no liability or damages due to typos, errors or omissions. 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. 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. When youre buying a home, zip your wallet! While Texas REALTORS has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, Texas REALTORS makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here. For example, a court may find that $1 does not satisfy legal requirements. When calculating deadlines for my buyer in the One to Four Family Residential Contract (Resale), should I include weekend days or federal holidays? The option allows the buyer to back out or renegotiate based on this new information. As a buyer, the option period allows you to include contingencies in your offer and address any concerns you might have before finalizing the contract. The. Usually on the contract you have 7 to 10 days to complete the inspection. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. Find a top real estate agent in your area to help you buy your dream home. After the inspection, your home inspector will issue a detailed report on the condition of your new home. It also allows time to negotiate repairs with the Seller. 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