1650 Highway 6, #350, Sugar Land , TX 77478 (Map) The option period ends at 5 pm central standard time on the last day of the option period. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. If a buyer backs out of a contract without a valid reason, the seller can keep the earnest money. Applicability of the legal principles discussed in this material may differ substantially in individual situations. or the buyer backs out with cause allowed in the contract. The standard form most agents use is the TAR Release of Money Texas form. 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. Working with a top buyers agent will help you make sense of option periods and all other things homebuying related with HomeLight, you can find a top-rated buyers agent near you in as little as two minutes to start your journey to closing on your dream home. 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. I can filter out , Accurately pricing a home takes more than a three-minute look at current sales numbers by a computer algorithm. 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. In most areas of the state, 1% of the purchase price or $500 is normal. Texas REALTORS provides content through various online platforms, including this blog. The option period starts the day AFTER the contract is executed. Once the offer is accepted, Homeward conducts a, You buy back the home from Homeward once your new mortgage is ready. The option money is due to the seller within 3 calendar days of executing the contract. Typically in this period the home buyer will coordinate for a thorough home inspection and any other inspections they like. (During this time, the Seller cannot back out of the contractonly the Buyer has that right.). In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . How much will my fixed rate mortgage payment be? In hot markets like Austin, an earnest money amount of 2% or more may be needed to stand out against other offers. There is not a predefined requirement for how much a buyer must pay for the option period in Texas; however, it typically ranges between $100 to $200. An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. Get started with a dependable Texas. (Option fees typically range from $100-$500. The option period and fee are finalized in the purchase contract terms of the sale. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. Please share this info with your Friends! In Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. You will not post any defamatory, discriminatory, libelous, threatening, vulgar, sexually explicit, abusive, profane, rude, or obscene content (including comments); b. Rachel Leigh Gross is a freelance writer and editor based in Providence, Rhode Island. Earnest money is money put down as a deposit with a Texas real estate purchase agreement. Equal Housing Opportunity Disclaimer: All information on this site is subject to change and should be independently verified. The typical option fee in Texas is $100 with a 7- to 10-day option period. Generally, the option provides the buyer time to do their due diligence on the property. The termination option ends at 5 p.m. local time to where the property is located. Most real estate transfer contracts contain an option fee, though it's not a legally binding requirement. An option period can be extended if the seller agrees. After the inspection, your home inspector will issue a detailed report on the condition of your new home. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. So basically, the termination option is a clause that allows buyers to legally cancel an executed contract. 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. Copyright 2021 Sheila Cox. After changes made in 2018, Texas law requires that your real estate agent delivers the earnest money within three days that the signed purchase contract is executed. During the Option Period, the property will be removed from 'Active" status and placed in "Option Pending" status in the MLS (Multiple Listing Service). 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. They won't, however, get their option fee back. This is where an option period becomes key even if your choice is to back out of a sale, youll feel better having decided that on your timeline. Finding a buyers agent like Bacak will help you navigate these waters to make an attractive offer that also gives you the time you need to make your decision. For example, if the contract is executed on July 15th, the option period then begins on July 16th. , not the seller, within 3 days of the effective date. As a buyer, its important to understand when and how you can back out of a contract and keep your earnest money. Youre able to make a more competitive offer with confidence.. 8 Documents You May Need For Tax Filings if You Sold a House. When you use our Buy with cash or Buy Before you sell solutions, youll benefit from our Dual Appraisal Advantage. If the buyer decides to back out of the sale after the option period because of a low appraisal (and the lender will not lend what is needed to purchase the property) or a financing issue, and the appraisal and financing contingencies have not been released, the buyer will still lose the option fee, but will be refunded their earnest money deposit. Oops! What is a Kick-Out Clause, and How Can You Avoid It? 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. Shes worked in the mortgage industry since 2019 and holds a BA in Communications from California State University, Monterey Bay. NOTE: The $200-400 Option fee is paid directly to the sellerusually via a personal check. 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.. 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. 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. 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. This good faith deposit is a lot like getting pre-approved for a mortgage before making an offer on a home it reassures the seller they arent wasting their time. In certain cases the buyer can negotiate with the seller to extend the Option Period. If you dont know what you want, the line disappears too quickly. This lets us know how we can best help get your client started with Homeward. 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. The compensation makes the contract legally enforceable. The Option Period is an important part of a real estate transaction in the state of Texas. But for those who terminate, they only lose the option fee. If you're an agent interested in turning contingent clients into cash buyers, schedule an appointment with a Homeward Advisor here. Home | FAQ | Blog | Mortgage Calculator | VA Loans | Terms of Use | Privacy Notice, 2710 S Clear Creek Rd Ste 115 In most markets, you would put down $1,000 to $4,200 in earnest money. 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. Candid AdviceI promise to give you candid advice on all homes and areas so you can make the best decisions. During this period, which can be 714 days depending on the contract terms, you can schedule home inspections to ensure that the house is in good condition. We strive to make our website accessible to everyone. 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 the seller does not deliver the sellers disclosure notice about the property condition within the time specified, the buyer can terminate the contract and have their deposit refunded. Learn everything you need to know about the home-buying process. In most places, you should put down a percentage. Share insights and experience. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4. Accurate description. Reasonable shipping cost. If this contingency was waived by the buyer, the deposit is forfeited if financing falls through. This is often done by paying an additional termination-option fee. 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 average option fees range from $100 to $500 - depending on the terms of the contract, where the property is located, and the number of days in the option period. 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%. 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. Option period can be extended, but generally these are due to other factors. require longer option periods. Plus, my proprietary House Report (see sample) includes the data and information you need to ensure that you are making great home purchase. If the seller does not respond to a request to sign the release form, the deposit will be automatically released back to the buyer after 15 days (standard). 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. If there is something I didn't answer for you or if you have additional questions, please reach out to me. How do we do that? 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. a. 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. You should contact an attorney or licensed CPA to obtain advice with respect to any particular issue or problem. Amanda Brown is a licensed real estate agent with the State of Texas. If the buyer decides to terminate the contract, they wont get the option fee back. The average earnest money deposit nationwide is 1% to 2% of the purchase price but 3% in California. In addition, if you find any defects that you cannot live with, then you must negotiate the repairs, or change in price, before the end of the Option period. What if the seller refuses to release earnest money in Texas? It depends on why the deal failed to close. The previous TREC contact stated that earnest money was due upon execution of this contract, a vague deadline that rarely happened. Like the Earnest Money Deposit, this fee is a show of good faith meant to demonstrate that youre serious about the purchase. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? You may be unfamiliar with the term option period, which is understandable as the phrase is specific to the Lone Star State. 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! The Option Fee may or may not be credited to the buyer'scosts at closing. As mentioned, the option starts the day after the contract is executed and ends on the date specified in the contract. I see that Paragraph B of the Addendum for Back-Up Contract (TAR 1909) is for the contingency date when the first contract has to terminate or else the back-up contract terminates. 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. Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. This includes weekends and holidays. But dont be confused the fee is also a win for buyers whether or not they back out! Here are some tips on how to take a break from technology so. For example, if your client's effective date is January 22 with a 10-day option period, the option period will end on February 1. 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. What Is an Option Fee? As one, Transaction coordinators play an important role in the real estate industry. It depends on how long the back-up buyer wants to stay in the back-up position. If the inspection uncovers serious issues or the seller wont budge on the contract terms, youre free to walk away from the sale without any repercussionsyoure allowed a change of heart. An option period favors the buyer much more than the seller. In this case, the buyers earnest money is refunded, even after the option period. Theres going to be multiple offers, and to be the best, you need to move rapidly, Bacak shares. How Much Does It Cost to Build a House in 2023? The Option Fee is given (hand-delivered or mailed) to the seller (or seller's agent) at the beginning of the contract period. The option period is a good time to negotiate these repairs, otherwise closing may be an afterthought. In Texas, the Option Period is typically between 1 and 10 days. I wont ignore potential defects that can cost you money, or effect your resale value, in the future. All rights reserved. In a sellers market, offers with option periods might lack a bit of appeal to a seller with a lot of interested buyers. 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. However, the more competitive the real estate market, the more important it becomes. The standard contract now states: Within 3 days after the Effective Date, Buyer must deliver $__ earnest money to __, as escrow agent, at __.. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. Buyers should make the most of the period and take every opportunity they can to solidify their decision to buy or terminate. 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. Starts at the beginning of the purchase contract period. (View helpful videos on my YouTube channel). 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! Typically, you must pay a fee to set up an option period. The 35 Steps to Building a House: Your Start-to-Finish Guide. I know my buyers termination option ends on Thursday, but at what time? While there is not a set duration for the option period, typically they range from 7-10 days on average. 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. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. Transactly Now Affiliated With eXp Realty ST. LOUIS, Mo. She has published content on The Balance, The Balance SMB, Thrive Global, and other smaller publications on topics ranging from personal finance and entrepreneurship to lifestyle and real estate. It is almost like an undo button. The chief benefit of the option period is it allows the homebuyer time to determine if they want to move forward with the purchase. How Soon Can A Mortgage Be Refinanced After You Buy? Most residential real estate contracts in Texas include an option period. 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