The Texas Real Estate Contract Option Period Explained

If you purchased a home in Texas then you’re familiar with the Texas real estate contract option period. It’s unique in a sense that my out-of-state buyers ask about it more than anything else.

While the option is clearly laid out in the contract, most buyers want to know more about it before they even begin their home search. A great real estate agent can help a buyer navigate the option period and make the most of it.

Buyers’ anxieties are put at ease when they realize how beneficial this is to them as the buyer.

What is the Option Period in Texas Real Estate?

The “option” in Texas real estate is an agreed upon number of days in the one to four family residential contract (purchase contract) that allows for the buyer to back out of the contract for any reason.

Generally, the option provides the buyer time to do their due diligence on the property.

When a buyer submits an offer on a home they can request an option period in exchange for a dollar amount. Think of it like home-purchase insurance for the buyer.

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. No questions asked. It is essentially the buyer’s security.

What Happens in the Option Period?

Typically in this period the home buyer will coordinate for a thorough home inspection and any other inspections they like.

Home Inspections during the Texas Real Estate Contract Option Period
Home Inspections are Conducted During the Option Period

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.

Sometimes in the home inspection report there are problems with the house that were not disclosed or unknown at the time. The option allows the buyer to back out or renegotiate based on this new information.

There are some financing situations (i.e. VA loans) that require the home to be in a particular condition. The option period is a good time to negotiate these repairs, otherwise closing may be an afterthought.

If the buyer opts to renegotiate the contract, they send the amended contract to the listing agent to discuss it with the seller. Often times the renegotiation will include having the seller make the repairs or concessions based on items found in the home inspection.

How Much Does the Option Cost?

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.

The cost varies based on the offer from the buyer. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period.

Sellers take the dollar amount and the duration in consideration when deciding on which offer to go with.

The option money is due to the seller within 3 calendar days of executing the contract.

Keep in mind that the seller keeps the option money if the buyer backs out of the contract. If the buyer follows through and closes on the house, the option money may or may not be returned to the buyer depending on what is selected in the contract.

When Does the Option Period Begin?

The option period begins the next day after the contract is executed. That is, when all parties have signed and agreed to the contract.

For example, if the contract is executed on July 15th, the option period then begins on July 16th.

How Long is the Option Period?

While there is not a set duration for the option period, typically they range from 7-10 days on average.

As mentioned, the option starts the day after the contract is executed and ends on the date specified in the contract. The buyer must make a decision no later than 5pm local time of the property.

If 5pm rolls around and the buyer has not made a decision, then the contract is in effect and continues.

Shorter option periods generally benefit the seller and longer option periods benefit the buyer. A buyer can make their offer more appealing to a seller by offering a shorter option period, say 5-7 days. Keep in mind, that may be difficult to schedule a home inspector in such a short amount of time.

Can I Extend the Option Period?

Option period can be extended, but generally these are due to other factors.

The buyer can make an offer to the seller requesting to extend the option period with additional compensation. This usually has to be more than a symbolic gesture of $1, but nonetheless compensation. The compensation makes the contract legally enforceable.

It’s at this time that the seller can deny and continue with the contract or the buyer can opt to back out and continue their home search.

The Texas real estate contract option period is in place to provide protection to the buyer. It’s a great tool for buyers to use to negotiate additional terms of the contract, or they can back out.

If you’d like more information regarding the Texas option period I would love to hear from you. I’m available any time for a call or chat if you.

Related Posts