As long as the buyer meets the requirements of the inspection contingency, their earnest money deposit is returned. This is the extra due diligence I do for you, to make sure that you are getting a great home. 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. The Option Fee may or may not be credited to the buyer'scosts at closing. 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. This guide provides all the info you need to get to know Sugar Land: , Finally! The property will be placed in OP (option pending) status in the MLS. For instance, putting $0 in the blank may risk the extension being held unenforceable. (Request a Custom Search), Easier ProcessMoving your family (and possibly changing jobs) is stressful enough. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. An executed contract is one where all parties have signed, initialed & money has been exchanged. If your client's ability to perform under a contract (i.e., close the transaction) is contingent upon the closing of another property, the Addendum for Sale of Other Property by Buyer (TAR 1908, TREC 10-6) should be made part of the contract. Texass option period is not mandatory and could affect a buyers offer being accepted as the seller could view it as inconvenient. Arbor Green Design is not a real estate agent, broker, or associated with any real estate team in the State of Texas or any other state. The non-refundable fee is paid to the seller (usually about $100). Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. That fee goes toward the seller's time holding the potential buyer's spot. Texas markets where multiple offers are common may have higher expectations. For additional consideration, the Option Period may be extended by the buyer for an agreed-upon number of days. It also compensates the seller for their time as you do your due diligence on the house. In the state of Texas, an option period allows a buyer to get these details before making the final choice. . NO other agent in the world does this! The applicability of the legal principles discussed in this material may differ substantially in individual situations. Youre able to make a more competitive offer with confidence.. Starts at the beginning of the purchase contract period. The option period begins the day after the contract is signed, and both buyer and seller are contractually obligated to carry out those terms. Usually on the contract you have 7 to 10 days to complete the inspection. Connect with a top agent to find your dream home. Just like you do about that oat milk latte. Grant Period From February 23, 2022, to August 31, 2023. What Documents Will I Need for Taxes if I Bought a House Last Year? 5.0. 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. It can be returned to the buyer or kept by the seller if the buyer defaults. 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. Buyers anxieties are put at ease when they realize how beneficial this is to them as the buyer. Share insights and experience. Option period can be extended, but generally these are due to other factors. 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. You may be unfamiliar with the term option period, which is understandable as the phrase is specific to the Lone Star State. How much will I need to save for a major purchase? Ideally, you want to have the home thoroughly inspected and the purchase contract reviewed by a real estate attorney before you sign anything. The Option Period is an important part of a real estate transaction in the state of Texas. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. All content on this website is created and managed by Arbor Green Design. Before inspections, you may fear the state of the home or the sellers willingness to negotiate repairs if the home needs serious work. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. 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. A general rule of thumb is the earnest money is refundable to the buyer if the seller terminates the contract or the buyer backs out with cause allowed in the contract. IKEA Life at Home Report 2021 A homeowner's routine home maintenance checklist Don't let the market tell you when you're ready to buy a home Get started Popular What Is an HOA and How Can It Affect Homeowners? The Option Fee is given (hand-delivered or mailed) to the seller (or seller's agent) at the beginning of the contract period. If 5pm rolls around and the buyer has not made a decision, then the contract is in effect and continues. 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. Sellers expect to see an option period in a residential real estate contract, but generally speaking the longer the option period is, the less competitive your offers is. When purchasing a home in Texas, you may hear the term "option period." 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. If neither party wishes to, the contract is terminated and the deposit is refunded to the buyer. 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. 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. Find real estate questions & answers. However, the more competitive the real estate market, the more important it becomes. Work with an expert buyers agent to help you understand this key purchase contract component, so you have the time you need to make your decision. a. The typical option fee in Texas is $100 with a 7- to 10-day option period. When buying a home in Texas, you should make the most of this time to ensure the property doesnt have any major issues. The Texas real estate contract option period is in place to provide protection to the buyer. As the buyer, it's important to note that the option and extension fees are more than a symbolic gesture. If your client wishes to terminate under Paragraph 5B, the Termination Option Paragraph, she must provide notice to the seller by 5 p.m. local time where the property is located on February 1. Here is what happens to earnest money in common scenarios. A home purchase isnt something you want to rush into. The Option Fee must be delivered no later than 11:59 p.m. on the third day after the effective date of the contract. However, this doesnt spell the end of your dream home journey. If the deal falls through for any reason, who gets the earnest money will depend on the provisions of the contract. Its unique in a sense that my out-of-state buyers ask about it more than anything else. Please limit your comment to 500 characters. A typical fee ranges between $100 and $500+, determined by the market and negotiated terms, and is due three days after the contracts start date. 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. How to Become a Transaction Coordinator in California, Transactly Acquires TC Solutions, LLC Further Expanding National Network of TCs. The median home price in Texas is $420,000. The buyer must submit the TREC Release of Earnest Money form with the contract termination. To get the privilege of having an option period as a homebuyer, youll pay an option fee to the seller. For real estate agents and transaction coordinators, its one of many details to oversee that can delay closing or even cause a deal to fall apart. (Download my Ultimate Sugar Land Guide), Great DataI will give you the most in-depth data you have ever seento help you make the wisest decisions. The buyer would still receive back the earnest money deposit (EMD) placed down at signing, usually between 1% and 3% of the sale price. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. 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. During this time period, a home buyer will want to complete any desired home inspections (general, architectural, foundation, pest, etc.). 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. Be sure to carefully read the language of the contract. As mentioned, the option starts the day after the contract is executed and ends on the date specified in the contract. In fact, some modestly priced homes only include option fees of $100. The earnest money and the option fee are credited to you at closing, explains Bacak for buyers who move forward. 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. . As an experienced professional, theyll use their knowledge to help you avoid any major missteps., Home appraisals are typically ordered by your mortgage lender. These two types of deposits are frequently confused and both must be delivered after signing a Texas real estate purchase agreement. The buyer can make an offer to the seller requesting to extend the option period with additional compensation. In most areas of the state, 1% of the purchase price or $500 is normal. Option periods delay sellers from achieving that goal, so a seller is typically motivated to shorten the length of the option period (or eliminate it altogether). 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. This includes weekends and holidays. from Transactly who will handle all the paperwork and deadlines for you for a low flat fee! Madeline Sheen is an associate editor for HomeLight who works with an amazing team of experts in home buying, personal finance, and mortgage to create articles for HomeLights Buyer Resource Center. For example, if the contract effective date is March 1, the option fee must be paid by 11:59 p.m. March 4. 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! Thank you! 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. All information on this website is subject to change and should be independently verifiedespecially before making decisions based on this information. In a sellers market, offers with option periods might lack a bit of appeal to a seller with a lot of interested buyers. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. 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. 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. To get the privilege of having an option period as a homebuyer, you'll pay an option fee to the seller. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. Creekview Realty notes that the option fee is usually $100 and the period is seven to 10 days. The deadline is moved forward a day if Day 3 falls on a weekend or legal holiday. What Does Contingent Mean In Real Estate? You don't want to end up with a house that's not worth the value you paid. Earnest money is refundable, and it's paid to the escrow agent to hold in escrow, not to the seller. Texas escrow law does not require earnest money and a contract is valid without it. 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. For example, some complex properties with lots of systems (septic, a well, a pool, etc.) This option period is usually 7 to 10 days, and you have the right to back out of the contract for almost any reason before it ends. Sellers take the dollar amount and the duration in consideration when deciding on which offer to go with. But that gives me pause as an agent because its very risky, Bacak shares. The option period starts the day AFTER the contract is executed. In this case, the buyers earnest money is refunded, even after the option period. Keep in mind, that may be difficult to schedule a home inspector in such a short amount of time. Making their services extremely sought after by new and experienced agents alike., Transactly Acquires TC Solutions, LLC Further Expanding National Network of TCs Transactly, a rapidly growing Real Estate Transaction Platform, has announced the acquisition of TC Solutions, LLC based in King County, Washington. Find many great new & used options and get the best deals for Period piece ceramic mennetsuke old woman Netsuke Japanese Clasp Traditional at the best online prices at eBay! Here are quick answers to common questions about earnest money Texas buyers, sellers, and real estate agents have. The home will revert to option pending on the market and sellers can only accept backup offers during this time. The option period can also be extended for an agreed-upon number of days. 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. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. But dont be confused the fee is also a win for buyers whether or not they back out! Buyers typically use this time to have the home inspected to make sure theres nothing substantially wrong with the property before they commit to the purchase. This may include retaining or refunding the earnest money. . Oops! Another point of security is that the seller cannot make any other deals during the option period. Typically in this period the home buyer will coordinate for a thorough home inspection and any other inspections they like. It is essentially the buyers security. 8 Documents You May Need For Tax Filings if You Sold a House. A seller with multiple offers wants the best price in the shortest amount of time. Agents Compete, You Win. Traditionally, the option fee was paid to the seller. Its a good faith deposit that shows serious intent to buy the home. As a buyer, its important to understand when and how you can back out of a contract and keep your earnest money. 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. Very important! Note that the inspection contingency is frequently waived in hot markets. Heres why: Option periods are baked into residential real estate contracts in Texas for a number of reasons. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. 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. Because the buyer is now in default of the contract, the seller can exercise their rights under the default provision. For that reason, its not a process that should be rushed. No representations or warranties, either expressed or implied, are made to the accuracy of the information herein, or with the respect to suitability, usability, feasibility, merchantability, or condition of any property or neighborhood herein. Plus, my proprietary House Report (see sample) includes the data and information you need to ensure that you are making great home purchase. Wire transfer fraud is a growing problem that can be hard to spot! This form must be signed by the seller and buyer and delivered to the title company. However, there's an extension when the deadline is on a weekend or holiday. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. 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). Like (5) Dislike. In general, the shorter your option period, the more attractive your offer is to the seller. The buyer can take advantage of this option to complete a few checks for their peace of mind. You (the buyer) and the seller agree on the length of the option period as one of the terms in your contract. Network of ExpertsMy network of experts can make your transition to the area as smooth as possible. 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. c. You will not post content or take any action on our blog posts that infringes someone elses rights or otherwise violates the law. The Texas Real Estate Commission revised its contracts effective January 1, 2016, to implement this time deadline. My buyer client is on the eighth day of his 10-day termination-option period, and the seller still h. March 19, 2018 | Author: TAR Staff. Its a great tool for buyers to use to negotiate additional terms of the contract, or they can back out. This is the same deadline as the earnest money deposit. 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. Who move forward title company is accepted the down payment holding the potential buyer & x27! Stressful enough than 11:59 p.m. March 4 Arbor Green Design contingency, earnest!, an option period as one of the inspection $ 0 in the shortest amount of time fee or! For buyers whether or not they back out of a real estate agents have period... Do note that the seller & # x27 ; s time holding the potential buyer & x27! 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