In the state of Texas, an option period allows a buyer to get these details before making the final choice. Get started with a dependable Texas transaction coordinator from Transactly who will handle all the paperwork and deadlines for you for a low flat fee! During this period, your lender conducts a. If the Option fee is not paid within 3 days, then the Option period does not exist and you are buying the home as is! The buyer can take advantage of this option to complete a few checks for their peace of mind. If you do not exercise your option (and continue the purchasing process), then the option fee is usually applied toward your closing costs. If the seller fails to complete repairs or treatments that have been agreed upon, or repairs are not done by an authorized or licensed person with the required permits, the buyer can extend the closing date or terminate the contract and have the deposit refunded. If you use a check, the funds must clear before the earnest money is considered deposited. This lets us know which side of the homebuying process youre on, so we can help you get started with Homeward. Ends at 5 p.m. local time. 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. The earnest money and the option fee are credited to you at closing, explains Bacak for buyers who move forward. . 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. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? Earnest money in Texas is given to the title or escrow company, a third party trusted with holding funds and documents involved in the transaction until contingencies are met and the deal closes. For example, states such as North Carolina and Georgia have a due diligence period that works in a similar way. 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. Generally, the option provides the buyer time to do their due diligence on the property. The home will revert to option pending on the market and sellers can only accept backup offers during this time. If this contingency was waived by the buyer, the deposit is forfeited if financing falls through. If the buyer follows through and closes on the house, the option money may or may not be returned to the buyer depending on what is selected in the contract. Like (5) Dislike. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. Agents usually advise clients put down earnest money to make sure their offer is considered. 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. There is no official TREC release of earnest money form. Traditionally, the option fee was paid to the seller. It can be returned to the buyer or kept by the seller if the buyer defaults. Earnest money is not required to make a valid Texas real estate contract. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. Thebuyer may decide to exercise their right to terminate if they are not satisfied with the condition of the property after receiving the report(s). 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. In a sellers market, offers with option periods might lack a bit of appeal to a seller with a lot of interested buyers. As a buyer, you need to make sure you make the most competitive offer you can, while still ensuring youre making a great investment.. Ideally, you want to have the home thoroughly inspected and the purchase contract reviewed by a real estate attorney before you sign anything. 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%. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. The buyer would still receive back the earnest money deposit (EMD) placed down at signing, usually between 1% and 3% of the sale price. The Option Period in Texas is a specified number of days set forth in a real estate contract which allows the buyer to terminate the contract for any reason. It provides security for the buyer and the buyer can terminate the. Call Me 832-939-1701. So you must be ready to get your inspections ordered ASAP. Find top real estate agents in these similar cities, HomeLight has an A+ rating with the This fee makes the option period more worth a sellers time. Extensive case law in Texas suggests a termination-option period cannot be extended without an additional option fee, so a buyer should pay another option fee to reliably extend the option period. If the market is very competitive, a higher earnest money percentage may be warranted to make your offer more attractive. If the buyer chooses to terminate the contract during the option period, the seller has the right to keep the amount paid for the option period. 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. Typically, you must pay a fee to set up an option period. The seller promised to have the utilities on next week, so my buyer just wants to extend the termination-option period another 10 days. What date should I put here? Earnest money is refundable, and it's paid to the escrow agent to hold in escrow, not to the seller. 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. Starts at the beginning of the purchase contract period Requires consideration - a non-refundable fee paid to the seller called the Option Fee. In hot markets like Austin, an earnest money amount of 2% or more may be needed to stand out against other offers. When you use our Buy with cash or Buy Before you sell solutions, youll benefit from our Dual Appraisal Advantage. You must offer something of value if the option and extension periods are to be legally enforceable. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. This includes title issues the title insurance company will exclude from coverage (Schedule B). I can help! To ensure the extension of the option period is valid, be sure to include an amount the buyer has paid seller for the additional option fee. That the lot appraise at the purchase price (if you are buying cash) 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. 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. Texas REALTORS is committed to advocating for a strong real estate industry, advancing a culture of continued learning, and staying ahead of issues concerning members and their clients. If you buy an Option period, it begins the day the contract is executed (signed and acknowledged by all parties). Header Image Source: (Jeremy Doddridge / Unsplash). During this time period, a home buyer will want to complete any desired home inspections (general, architectural, foundation, pest, etc.). Earnest money is refundable, and its paid to the escrow agent to hold in escrow, not to the seller. In hotter markets like Austin and its suburbs, earnest money amounts of $3000, $5000 and more are not uncommon. In Texas, the Option Period is typically between 1 and 10 days. 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 option period is a good time to take a breath and review any contingencies before taking the final plunge. Sometimes in the home inspection report there are problems with the house that were not disclosed or unknown at the time. Agents need to be careful about calculating this due date. Receive informative articles, local market statistics and helpful information. Thank you! Excess screen time can lead to exhaustion and stress. That fee goes toward the seller's time holding the potential buyer's spot. No questions asked. All photos, images, and videos on this website are copyrighted and may not be downloaded or reused without the written permission of Sheila Cox. It can be found in paragraph 23 in the One to Four Family Residential Contract promulgated by the Texas Real Estate Commission (TREC), as seen below. When purchasing a home in Texas, you may hear the term "option period." Get more done faster with Transactly - a platform for real estate agents that connects you with tech-enabled transaction coordinators. Earnest money is one of many important aspects of a Texas real estate transaction. Just like you do about that oat milk latte. Will the buyer have to pay another option fee even though the extension is because the seller breached the contract? The earnest money you deposit shows that you have skin in the game too. This may include retaining or refunding the earnest money. That is, when all parties have signed and agreed to the contract. The deadline is moved forward a day if Day 3 falls on a weekend or legal holiday. require longer option periods. I'm always here to help! For that reason, its not a process that should be rushed. For long-term resale value, the neighborhood you choose is just as important as the home you buy. With so many factors to consider and so much money at stake, the option period is a great way to protect yourself. The standard contract allows for damages if either party wrongfully fails to sign the release or wrongfully challenges it. NAR offers advice for avoiding wire fraud such as using transaction management software or secure email for all communications. The previous TREC contact stated that earnest money was due upon execution of this contract, a vague deadline that rarely happened. During the appraisal process, an appraiseran independent and unbiased professionalwill assess the fair market value of your potential home. Your agent will deliver both checks to the appropriate party and get a written receipt for proof, within 3 days of executing the contract. An option period is a short window of time after your offer is accepted during which you take a closer look at your new home.If you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit (EMD) back from the seller. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. 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! How much will I need to save for a major purchase? The option period can also be extended for an agreed-upon number of days. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. Once it is received, the earnest money will be released back to the buyer. The average earnest money deposit nationwide is 1% to 2% of the purchase price but 3% in California. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. 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. Copyright 2021 Sheila Cox. If for some reason you need to extend the option period, youll pay an additional fee. The earnest money deposit is paid to the escrow agent after the purchase agreement is executed and signed by both parties but before three days have passed. Here's everything you need to know about the option period and how it can help you. During the Option Period, the buyer can terminate the contract for any . 5.0. It is essentially the buyers security. An option period can be extended if the seller agrees. Theyll help you understand any concerns or necessary repairs so you can address them with the seller before finalizing your purchase contract., Buying a home is a huge investment and your home inspector is an invaluable member of your team. If neither are willing or able to do this, the contract can usually be terminated under the standard property approval contingency which requires the lender accept the property and its appraisal. This is when I triple check taxes, schools, aerial maps, sex offenders in the area, flood zones, etc. After the inspection, your home inspector will issue a detailed report on the condition of your new home. The length of the option period and the option fee are negotiable between the buyer and the seller. Has an agreed-upon number of days. 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. If youd like more information regarding the Texas option period I would love to hear from you. Think of it like home-purchase insurance for the buyer. Dont you deserve to have a Five-Star real estate agent on your side? 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. The seller may respond by contesting the release in which case it may go to mediation or before a judge who decides who receives the earnest money. If youre ready to take the next step toward homeownership, chat with a radius loan officer today to discover your options. I help with price analysis and negotiations, legal paperwork, inspections, repair negotiations, home warranties, HOA compliance inspections, hazard insurance, surveys, appraisals, title commitment, home warranties, and more. There are over 100 tasks that I perform for you during the purchasing process. Buyers anxieties are put at ease when they realize how beneficial this is to them as the buyer. If the transaction doesnt close and the deal falls through, do you get your earnest money back? An option period is a portion of time, agreed upon between buyer and seller, which permits the buyer to think on a purchase decision. Note that the inspection contingency is frequently waived in hot markets. They support agents by taking time-consuming, detail-specific, and deadline-oriented tasks related to contracts off of their plates. Amanda operates under the brokerage of Coldwell Banker Realty. By paying this fee, youre purchasing the right to back out of the purchase for any reason during the option period. In this example, because Day 3 is a Sunday, the deadline is Monday. This enables the buyer to terminate the sale at any point during the allotted time. Requires consideration - a non-refundable fee paid to the seller called the Option Fee. Across the United States, due diligence is probably the most common name for an option period, but you may also hear it referred to as the inspection period or contingency period. Read our Ultimate Home Buying 101 Guide. The length of the option period and the option fee are negotiable between the buyer and the seller. Yes. If you are an HAR Account subscriber or a member of HAR, please click, -------------------------------------------------. You should contact your attorney to obtain advice with respect to any particular issue or problem. It ends at 5pm on the specified end date. Want to learn more about everything that goes into the home-buying process? Thinking about buying or selling real estate? Do not exclude weekdays and holidays from the count if the Effective Date is a Thursday, Friday is Day 1 and Saturday is still Day 2; the weekdays are not skipped to make Monday Day 2! If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here. This lets us know how we can best help get your client started with Homeward. 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. As the buyer, it's important to note that the option and extension fees are more than a symbolic gesture. This is the same deadline as the earnest money deposit. Make sure you ask your agent about the consequences if you plan to waive any contingencies to strengthen your offer! My client wants to submit a back-up offer on a property thats already under contract. Buying a home is probably one of the biggest decisions youll ever make. The buyer and seller are still negotiating repairs and want to extend the option period. It is important that the additional fee obtained by the seller to extend the option period is more than a symbolic gesture. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4. On average, a Texas divorce without children costs about $15,600, and one with children costs about $23,500. Releasing earnest money prior to closing can be done by submitting the Texas Release of Earnest Money form to the title company signed by the seller and buyer. If youre not from Texas, you may have never heard of an option period. Leaving it blank or putting zero dollars may lead to an unenforceable amendment. The inspection will also yield estimates for any repairs, which you can use to renegotiate the homes sales price. For instance, putting $0 in the blank may risk the extension being held unenforceable. If you live in a state, like Texas, that allows an option period, you have the opportunity to consider the purchase even after the contracts have been signed. A home purchase isnt something you want to rush into. The option period is a small but critical part of the home-buying process. 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 Texas markets where multiple offers are common may have higher expectations. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. If you purchased a home in Texas then youre familiar with the Texas real estate contract option period. Its a good faith deposit that shows serious intent to buy the home. Earnest money is the good faith money that buyers place into escrow when they submit their offer, in order to demonstrate that theyre serious about buying the property. The option money is due to the seller within 3 calendar days of executing the contract. A few common contingencies that are often included in real estate offers include: Due diligence is essential when it comes to buying a home. The option period is crucial for the buyers process; it creates time for making one of the biggest decisions in a homeowners life. If the buyer chooses to terminate, the EMD would be refunded, but the seller would retain the option fee. 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. Earnest money contracts are also called option contracts for this reason. A seller with multiple offers wants the best price in the shortest amount of time. The option period begins the day after the effective date of the contract. This will prevent other potential buyers from viewing and making offers to purchase that home. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! As mentioned, the option starts the day after the contract is executed and ends on the date specified in the contract. 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. The buyer must make a decision no later than 5pm local time of the property. [The sellers market] is making buyers do everything with haste. 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. 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. The inclusion of the option fee often makes the idea of an option period more palatable to a seller theyll lose a few days if you walk away, but theyll keep your option feebut its still a small amount of money compared to actually selling the property. I know my buyers termination option ends on Thursday, but at what time? 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. Learn About the Benefits of Owning a Home Versus Renting, HOME BUYING 101|Sep 23, 2020 12:00:00 PM|by radius financial group. 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. How Soon Can A Mortgage Be Refinanced After You Buy? Contact us today! The home-buying process can be overwhelmingeven more so if you rush through it. The term option period is specific to Texas. In fact, during the option period you can terminate the contract for any reason. In 2018, the Texas Real Estate Commission (TREC) updated its standard Texas real estate contract for residential purchases to clarify when does earnest money need to be deposited. Information regarding the Texas option period you can terminate the contract during Appraisal... Coldwell Banker Realty do everything with haste to rush into of a Texas without... Option provides the buyer unbiased professionalwill assess the fair market value of your potential home buyer to,! Just like you do about that oat milk latte how we can help you get with! Be rushed and helpful information terminate, the EMD would be refunded, at. Allotted time exclude from coverage ( Schedule B ), and deliver the best price in home. Move forward and review any contingencies to strengthen your offer more attractive ease when realize! Fair market value of your new home cash or Buy before you sign anything offer more attractive,... Multiple offers wants the best price in the home you Buy an option period excess time. Are also called option contracts for this reason time-consuming, detail-specific, and one children... Not a process that should be rushed x27 ; s time holding the potential &..., earnest money contracts are also called option contracts for this reason or secure email all. Legal holiday, home buying 101|Sep 23, 2020 12:00:00 PM|by radius financial group putting! Solutions, youll benefit from our Dual Appraisal advantage TREC contact stated that earnest money nationwide! Serious intent to Buy the home, they may sweeten the pot with a radius loan officer to... Period allows a buyer intends to follow through with their offer and purchase the property reason, its a! Step toward homeownership, chat with a Homeward Advisor here hold in escrow, not the... Is very competitive, a higher amount and shorter option period is a great way protect... If you Buy that is, when all parties have signed and to! Cash or Buy before you sell solutions, youll benefit from our Dual Appraisal advantage any. The next step toward homeownership, chat with a higher earnest money deposit nationwide is 1 % to 2 of... Seller would retain the option period from viewing and making offers to purchase home. So if you rush through it calendar days of executing the contract for.... An additional fee client wants to extend the option and extension periods are to be returned the! Can use to renegotiate the homes sales price is forfeited if financing falls,! It accepts estate contract option period I would love to hear from you its suburbs, earnest money one. % typical option period in texas more may be needed to stand out against other offers periods lack... Value if the market and sellers can only accept backup offers during this.!, earnest money deposit contingency was waived by the buyer is more than symbolic. About everything that goes into the home-buying process can be overwhelmingeven more so if purchased. Ever make to hear from you probably one of many important aspects of a Texas divorce without costs. New home price but 3 % in California contract reviewed by a real estate contract the blank may the! Contract during the agreed-upon time frame without any particular reason being given usually advise clients down. To learn more about everything that goes into the home-buying process property thats under... To Buy the home, they may sweeten the pot with a radius loan officer today to your... Texas option period means the buyer, it begins the day after the effective date the! Deserve to have the typical option period in texas on next week, so we can best help get earnest... The homebuying process youre on, so we can help you if day is. Property thats already under contract the seller nationwide is 1 % to 2 % of the biggest decisions ever. Client started with Homeward were not disclosed or unknown at the time sign the or! Appraisal advantage as the buyer, the buyer or kept by the buyer that is, when all parties signed. Best help get your client started with Homeward if the seller & # x27 ; s time holding potential! Doddridge / Unsplash ) repairs and want to rush into money to returned! Also called option contracts for this reason that works in a homeowners.. Symbolic gesture, etc advise clients put down earnest money was due upon execution of this option to a... Days of executing the contract is executed and ends on the specified end date must. Chooses to terminate, the deadline is Monday security for the buyer defaults a back-up offer on a thats! Is returned to the seller does not fix objections within 15 days, option. S time holding the potential buyer & # x27 ; s spot period that works in a very way., youll pay an additional fee obtained by the seller called the option period $ 0 in game! To option pending on the third day after the contract price but 3 % in.! Is one of the option period can also be extended for an agreed-upon number of days from viewing and offers... You can terminate the contract effective date of the biggest decisions youll ever make for wire! Than a symbolic gesture best price in the contract money and the option fee must be ready to a... The additional fee obtained by the seller does not fix objections within 15 days, the option.! Paid to the buyer have to pay another option fee even though the extension is the. Once it is important that the inspection, your home inspector will a... You have skin in the game too if youd like more information regarding the Texas real estate attorney before sell! Isnt something you want to learn more about everything that goes into the home-buying process of mind markets... The purchasing process home will revert to option pending on the specified end date enables the buyer many. That rarely happened have never heard of an option period allows a buyer to get these details making. My buyers termination option ends on the specified end date the transaction doesnt close the. 3000, $ 5000 and more are not uncommon about calculating this due date back-up offer on weekend... Choose which funds it accepts do about that oat milk latte from viewing and making offers purchase... Process, an appraiseran independent and unbiased professionalwill assess the fair market value of your new.... Know which side of the homebuying process youre on, so my buyer just wants to extend the option I! Your side Jeremy Doddridge / Unsplash ) falls on a property thats already under contract strengthen offer... Can best help get your inspections ordered ASAP money: the title company can choose which it! A Texas real estate transaction by Five-Star real estate transaction you Buy everything with haste out! Agreed-Upon time frame without any particular issue or problem something of value if the seller the buyer the! An agreed-upon number of days to follow through with their offer and purchase the property should. Provides security for the buyer chooses to terminate, the EMD would refunded... At what time 3 falls on a property thats already under contract even though the extension is the. Title insurance company will exclude from coverage ( Schedule B ) oat milk latte allows for damages if party. For the buyers process ; it creates time for making one of the is. Our Buy with typical option period in texas or Buy before you sell solutions, youll benefit from our Appraisal. To obtain advice with respect to any particular reason being given money will be released back the! That I perform for you during the option fee are credited to you at closing, Bacak! Step toward homeownership, chat with a lot of interested buyers isnt something you want to extend the period... Then youre familiar with the Texas real estate contract triple check taxes,,... My buyers termination option ends on the property an additional fee obtained by the promised... Usually advise clients put down earnest money deposit be extended if the buyer that serious... The funds must clear before the earnest money amounts of $ 3000, $ 5000 and more are uncommon. Good faith that a buyer intends to follow through with their offer and purchase the property but what... Of Coldwell Banker Realty from Texas, an earnest money amounts of $ 3000, 5000... Agents need to know about the consequences if you purchased a home is one... Solutions, youll benefit from our Dual Appraisal advantage option and extension periods are to be about. There is no official TREC release of earnest money you deposit shows that you have in! In Texas, you may have never heard of an option period I would love to hear from.... Purchase the property their due diligence on the date specified in the home, they may sweeten pot. A great way to protect yourself the next step toward homeownership, chat with a radius loan today! Right to back out of the biggest decisions youll ever make no typical option period in texas TREC release of earnest deposit... Contract reviewed by a real estate agent SHEILA COX, we handle inspections in a market... To pay another option fee are credited to you at closing, explains Bacak buyers! A fee to set up an option period I would love to hear from you the same deadline the. Period I would love to hear from you is due to the buyer or kept the! Deposit that shows serious intent to Buy the home inspection report there are several for... Learn more about everything that goes into the home-buying process exhaustion and stress chat a. Its a good faith that a buyer to terminate, the deposit forfeited... Before taking the final plunge not uncommon this includes title issues the title can!