Texas Option Period
If you’ve bought real estate in Texas you are probably familiar with the “option period” clause. The option clause allows buyers and sellers to negotiate a specified time, usually 7 to 10 days, during which a buyer can fully evaluate the condition of the property and perhaps renegotiate the initial offer price based on inspections, needed repairs, or other considerations. For this right, the buyer pays the seller a nonrefundable “option fee.” The option fee amount is completely negotiable but can usually ranges between $100 to $200.
During the option period the buyer can terminate the contract for any reason without risking the loss of their earnest money. If a buyer should choose to terminate the contract during the option period the seller gets to keep the option fee money and the buyer is refunded their earnest money. The option money can be credited back to the buyer at closing or not.
The buyer must pay the option fee to the seller within two days of the effective date of the contract. If the buyer fails to pay the seller the option fee within this two day period the buyer will lose the termination option and the buyer shall not have the unrestricted right to terminate the contract.
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. An executed contract is one where all parties have signed, initialed & money has been exchanged. As of January 2016 the option period time ends at 5 p.m. on the final day of the period.
The option fee should always be paid by check. The seller or the seller’s agent must sign in the appropriate area of the contract for the receipt of the option fee.
***This post is not a substitute for the advice of an attorney.***