Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? Youre able to make a more competitive offer with confidence.. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. When calculating deadlines for my buyer in the One to Four Family Residential Contract (Resale), should I include weekend days or federal holidays? Copyright 2021 Sheila Cox. Be among the first to hear about upcoming events, industry insights, expansion announcements, and more. There are several options for paying Texas earnest money: The title company can choose which funds it accepts. A seller with multiple offers wants the best price in the shortest amount of time. For example, all parties execute the contract on June 2nd. What date should I put here? I have the expertise to help solve complicated problems that often occur in the process. There is often a nonrefundable option fee (typically around $100) paid by the buyer that is usually applied to closing costs if the buyer decides to move forward with the purchase. hbspt.cta._relativeUrls=true;hbspt.cta.load(7043426, '1d20d9bc-09e0-4630-9baa-430ec5a1c064', {"useNewLoader":"true","region":"na1"}); In Texas, the option period begins the day after the contracts are signed. HomeLight, Inc. 100 1st Street, Suite 2600, San Francisco, CA 94105. The typical option fee in Texas is $100 with a 7- to 10-day option period. Unfortunately, if youre trying to buy a home in a competitive real estate market, you may have to forfeit your request for things like a home inspection if you want a seller to accept your offer. This requires paying a small option fee. Shipping speed. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. It depends on why the deal failed to close. Texas markets where multiple offers are common may have higher expectations. We implement strict design techniques to achieve WCAG AA compliance. Real estate is a huge financial and legal commitment. (Read client testimonials), Local Area ExpertiseThis isnt just my businessits where I work and live (for 20 years) so I really know the area. Before inspections, you may fear the state of the home or the sellers willingness to negotiate repairs if the home needs serious work. The seller promised to have the utilities on next week, so my buyer just wants to extend the termination-option period another 10 days. You should contact your attorney to obtain advice with respect to any particular issue or problem. The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. Like the Earnest Money Deposit, this fee is a show of good faith meant to demonstrate that youre serious about the purchase. She has 4+ years of writing experience and holds a degree in English Literature from Brown University. Reverse Mortgage Pros and Cons from a Financial Planners Perspective, 11 Questions to Ask When Buying a New Construction Home. 5.0. 8 Documents You May Need For Tax Filings if You Sold a House. During the Option Period, the property will be removed from 'Active" status and placed in "Option Pending" status in the MLS (Multiple Listing Service). Shorter option periods generally benefit the seller and longer option periods benefit the buyer. An option period favors the buyer much more than the seller. For example, states such as North Carolina and Georgia have a due diligence period that works in a similar way. The standard TREC contract has default provisions that allow the seller to cancel the contract if the earnest money is not deposited on time. 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. 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. Texas markets where multiple offers are common may have higher expectations. Im available any time for a call or chat if you. Contact us today! An executed contract is one where all parties have signed, initialed & money has been exchanged. If you buy an Option period, it begins the day the contract is executed (signed and acknowledged by all parties). 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. The Texas Real Estate Option Period: Provides security for the buyer. 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. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. Oct. 25, 2022 Transactly, a current leading real estate transaction Management Platform that provides tech-enabled transaction coordination services nationwide, has contracted with the groundbreaking brokerage, eXp Realty. 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. (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. 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. The option period starts the day AFTER the contract is executed. Applicability of the legal principles discussed in this material may differ substantially in individual situations. If a third party such as the buyers agent deposits the funds on behalf of the buyer, Texas escrow rules require they sign a Third Party Deposit form. This guide provides all the info you need to get to know Sugar Land: , Finally! Agents need to be careful about calculating this due date. Thats because option periods are called different things in different places. 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. All photos, images, and videos on this website are copyrighted and may not be downloaded or reused without the written permission of Sheila Cox. The Option Period is an important part of a real estate transaction in the state of Texas. The non-refundable fee is paid to the seller (usually about $100). However, there's an extension when the deadline is on a weekend or holiday. Im your transaction manager and will guide you, step-by-step, through the process so you never miss an important deadline. Be Aware of These 15 Tenant Rights. Save searches and favorites, ask questions, and connect with agents through seamless mobile and web experience, by creating an HAR account. 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. Shes worked in the mortgage industry since 2019 and holds a BA in Communications from California State University, Monterey Bay. This lets us know which side of the homebuying process youre on, so we can help you get started with Homeward. The option period and fee are finalized in the purchase contract terms of the sale. In other states, you can include contingencies in your offer and make sure theyre addressed before closing day. Both the option periods fee and duration are negotiable. Equal Housing Opportunity Disclaimer: All information on this site is subject to change and should be independently verified. As of January 2016 the option period time ends at 5 p.m. on the final day of the period. A buyer can make their offer more appealing to a seller by offering a shorter option period, say 5-7 days. As one, Transaction coordinators play an important role in the real estate industry. 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. The buyer can make an offer to the seller requesting to extend the option period with additional compensation. Its a great tool for buyers to use to negotiate additional terms of the contract, or they can back out. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. If you dont know what you want, the line disappears too quickly. 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. This is when a home inspection will occur. When youre buying a home, zip your wallet! 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. They won't, however, get their option fee back. . However, the more competitive the real estate market, the more important it becomes. Earnest money contracts are also called option contracts for this reason. Gain access to our suite of customizable marketing assets for agents. That said, its important to recognize that while paying the option fee and including an option period provides more reassurance, asking for too much time may make your offer less competitive.. 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. On average, a Texas divorce without children costs about $15,600, and one with children costs about $23,500. In Texas, the Option Period is typically between 1 and 10 days. You must offer something of value if the option and extension periods are to be legally enforceable. Very important! If the transaction doesnt close and the deal falls through, do you get your earnest money back? The Texas Real Estate Commission revised its contracts effective January 1, 2016, to implement this time deadline. Need a painter, electrician, mover, insurance company, etc.? During the Option Period, the buyer can terminate the contract for any . This fee makes the option period more worth a seller's time. Your submission has been received! 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. Since Paragraph 5A, the Delivery of Earnest Money and Option Fee Paragraph, uses the word withinwhen describing the time period, Day One of the option period is the day after the effective date of the contract. Enhance your real estate experience with HAR App, To post a comment on this blog post, you must be an HAR Account subscriber, or a member of HAR. This is the same deadline as the earnest money deposit. If not, they'll face little to no penalty, says Katie Collins, Customer Experience Manager at Homeward. The term option period is specific to Texas. The typical option fee in Texas is $100 with a 7- to 10-day option period. 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. The length of the option period is negotiable and it may be as short as 5 days. An option period usually comes at the cost of a non-refundable option fee on the buyers side. 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. Buyers anxieties are put at ease when they realize how beneficial this is to them as the buyer. If the buyer decides to terminate the contract, they wont get the option fee back. Bacak explains, The more option money you put down, the better as it shows the seller youre invested and wont terminate.. For example, some complex properties with lots of systems (septic, a well, a pool, etc.) NAR offers advice for avoiding wire fraud such as using transaction management software or secure email for all communications. Use TRECs Amendment to the contract (TAR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. The option period begins on June 3rd. 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. Connect with a top agent to find your dream home. The option period begins the day after the contract is signed, and both buyer and seller are contractually obligated to carry out those terms. The previous TREC contact stated that earnest money was due upon execution of this contract, a vague deadline that rarely happened. To get the privilege of having an option period as a homebuyer, you'll pay an option fee to the seller. Get more done faster with Transactly - a platform for real estate agents that connects you with tech-enabled transaction coordinators. Header Image Source: (Jeremy Doddridge / Unsplash). Im on your side because Im YOUR agent. 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? This inspection period, also known as the option period, typically lasts anywhere between 5 and 10 days. Your real estate agent can advise you if your offer has a good chance of being accepted without earnest money, but it may be hard to get your offer taken seriously without putting down a good faith deposit. They support agents by taking time-consuming, detail-specific, and deadline-oriented tasks related to contracts off of their plates. Agents Compete, You Win. Join the 10,000 agents who already receive our weekly newsletter. Your agent will deliver both checks to the appropriate party and get a written receipt for proof, within 3 days of executing the contract. 4.9. In this example, because Day 3 is a Sunday, the deadline is Monday. Want to learn more about everything that goes into the home-buying process? If you use a check, the funds must clear before the earnest money is considered deposited. If the buyer terminates the contract, the seller can often keep the earnest money. 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. A home purchase isnt something you want to rush into. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. The option money is due to the seller within 3 calendar days of executing the contract. Earnest money was due upon execution of this contract, the buyer decides to terminate the contract, deadline... The Texas real estate agents that connects you with tech-enabled transaction coordinators play an role. Something of value if the earnest money but typically, anywhere between 5 and days... 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