Home Buyer’s Safety Net – The Option Period

Buying real estate can be a daunting experience, especially for a first time buyer. There are so many things to take into consideration. Fortunately, in the standard Texas residential real estate sales contract, there is a “buyer-friendly” clause allowing for the buyer to purchase an option period. Utilization of this provision provides a safety net as it allows the buyer to back out of the contract for a specified number of days for any reason. The specific terms are subject to negotiation between the buyer and seller, but are typically about 7 days and cost the buyer an average of $100. But terms can vary depending upon the circumstances. The fee is non-refundable to the buyer, but can be applied to the sales price if the transaction is completed.

The buyer should always take advantage of this feature. It allows the buyer an opportunity to “kick the tires”. During this time, the buyer will want to hire a professional home inspector to look over the home and report any deficiencies. The buyer may want to hire a termite inspector as well. If there are any major issues, the buyer may elect to have a structural engineer weigh in. The buyer can also use this time to do their own research on the other items of interest such as neighborhood safety or quality of schools.

Before the option period expires, the buyer should carefully evaluate all the information gathered. There are three possible courses of action:

1. If nothing significant turned up, the buyer can let the option expire and proceed forward with the contract.

2. The buyer may back out of the contract. There is no need to justify this action to the seller. The buyer can back out for any reason. Even if there is only a change of heart. The buyer’s agent simply forwards a signed Notice of Termination and Release of Earnest Money Request to the seller’s agent, prior to the option period expiration date. While the escrow funds are returned to the buyer, the option money is forfeited to the seller.

3. The buyer could request a repair done based on the findings. For example, if the inspection discovered that the home had an A/C issue, the buyer could ask the seller to either make repairs, or reduce the price accordingly to allow the buyer to make the repairs after closing. If an agreement on the A/C repair is reached, the transaction can proceed forward. If not, the buyer would either walk away or accept the property in an as-is condition.

Occasionally, there are instances where a buyer waives the right to the option period. This is rare but most likely to occur when the buyer has extensive experience in home construction or when there are competing offers on the table. Even then, the buyer still is encouraged to have inspections performed prior to closing. But if something turns up that the buyer can’t live with, the buyer cannot walk away unscathed. The seller now can exercise remedies in the contract, such as specific performance, or retention of escrow funds. It is always much less painful to purchase an option period to allow you to walk away in case something turns up.

A seasoned real estate agent will always encourage their buyers to take advantage of the option period. Since many issues with a home are not easily detectible by the untrained eye, it is always prudent to bring in professionals to help with the needed due diligence. The proper utilization of this period could prevent the buyer from experiencing the dreaded “buyer’s remorse”.

Claudia Hohlt has been a local Realtor in Montgomery County since 2000. Claudia has earned the GRI designation, and was certified by HAR as a Top Production Realtor® in 2007 and 2008. Her office is between Conroe and Montgomery at 13080 Hwy 105W #130. Claudia Hohlt can be reached at 936-537-1656 or emailed at Claudia@ClaudiaHohlt.com. Her blog can be found at ClaudiaHohlt.com.