What’s an Option Period?

When purchasing a home, there are so many new terms to understand. One of the most important terms to understand is the Option Period. Let’s break it down!

What is the Option Period?

In Texas, the Option Period is a specified number of days that is determined in a contract. The Option Period allows buyers to pay an Option Fee, also determined in the contract, to have the right to terminate the contract without loosing their earnest money. Think of it as a security and investigation period! During the Option Period, this is our chance to do our due diligence on a house, so that we know what you are really buying. This is when we’ll have an inspection and any further evaluation needed.

The Option Period always starts the day after a contract is executed and ends at 5:00pm on the final day.

Who determines how long the Option Period is? Who determines what the Option Fee is?

We do! We’ll work together to assess multiple factors and determine the best number of days to ask for and the right fee. But, it is s negotiable and the seller could counter. We’d work through that together!

What if the inspector discovers problems with the house during the Option Period?

They will! No house is perfect! We’ll walk through their report and make a game plan. If there are needed repairs, we will negotiate with the sellers and request that they perform the repairs or give us a credit at closing for the costs of the repairs.

Give me an example!

You are ready to write an offer on a house that is listed for $400,000. We decide that we want a 7 day Option Period and we want to pay a $250 Option Fee. We decide on $250 because you are comfortable loosing that amount if, for whatever reason, we terminate during the Option Period.

Congrats! They accepted your contract at 9:30pm on a Monday. The first day of your Option Period is tomorrow! Tuesday(Day 1) morning, we deliver your Option Fee of $250 and your $4,000 Earnest Money (typically 1% of sales price) to the title company because the fees are both due within three days of executing a contract.

We schedule our inspection for Wednesday (Day 2). The inspector finds that the electrical panel is not up to code, and needs to be evaluated by a licensed electrician. He also suggests having an HVAC company come and look at the AC unit.

The electrician meets me at the house on Thursday (Day 3) and sends us a bid for the needed upgrades on Friday (Day 4).

The HVAC company comes out on Saturday morning (Day 5) and sends us a bid that evening. We put our heads together and determine that we want to ask the seller for a credit to cover the cost of a new electrical box and we want them to service the HVAC. I write up the amendment with our requests and send it to you to sign. We submit it to the sellers that evening(Still Day 5).

Sunday morning (Day 6) the sellers send a response. They’ll service the HVAC, but they will not give a credit for the total cost of the needed electrical upgrades. We counter back. After a few more rounds, we come to an agreement on Monday morning (Day 7).

If we did not come to an agreement on Monday, you would have until 5:00pm to terminate the contract. You could walk away, get your Earnest Money back (1% of purchase price) and just lose your $250 Option Fee. This is never the goal, but it’s the beauty of the Option Period! You can opt out!

Questions about the Option Period? Let’s get together and chat! Schedule a meeting here!