In Texas, a typical option period is around 10 days and the typical option fee is about $10.00 to $30.00 per day. Its a good faith deposit that shows serious intent to buy the home. Home | FAQ | Blog | Mortgage Calculator | VA Loans | Terms of Use | Privacy Notice, 2710 S Clear Creek Rd Ste 115 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. The option period is a good time to take a breath and review any contingencies before taking the final plunge. Do not exclude weekdays and holidays from the count if the Effective Date is a Thursday, Friday is Day 1 and Saturday is still Day 2; the weekdays are not skipped to make Monday Day 2! During the appraisal process, an appraiseran independent and unbiased professionalwill assess the fair market value of your potential home. Its the last day of my buyers option period. This 3-day deadline is extended is extended to the next business day when the earnest money due date falls on a legal holiday or weekend. If youre ready to take the next step toward homeownership, chat with a radius loan officer today to discover your options. That the lot appraise at the purchase price (if you are buying cash) My job is to protect you from defective homes as much as possible while helping you make a sound financial investment. With so many factors to consider and so much money at stake, the option period is a great way to protect yourself. The Option Period is an important part of a real estate transaction in the state of Texas. All days are calendar days. I can help! If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. In certain cases the buyer can negotiate with the seller to extend the Option Period. (Heres a list of home inspectors.) Finding a buyers agent like Bacak will help you navigate these waters to make an attractive offer that also gives you the time you need to make your decision. If a buyer wishes to terminate the contract during the Option Period, he/she must notify the seller by 5 p.m. local time (where the property is located) on the day that the Option Period ends. Will the buyer have to pay another option fee even though the extension is because the seller breached the contract? Do not exclude weekdays and holidays from the count if the Effective Date is a Thursday, Friday is Day 1 and Saturday is still Day 2; the weekdays are not skipped to make Monday Day 2! Yes, a Texas real estate contract is still valid even if earnest money is not required or if the buyer has not made the deposit. 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. A buyer can make their offer more appealing to a seller by offering a shorter option period, say 5-7 days. Both the option periods fee and duration are negotiable. Therefore, we promote stricteditorial integrity in each of our posts. In most places, you should put down a percentage. 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? d. You will not post any information intended to sell or advertise a business, product, or service. How much earnest money is normal depends on the norm where you live. Sellers are free to reject offers that include option periods or to make counter offers without option periods. Buyers & Agents: Be Careful About Wire Fraud! If you're a homebuyer interested in learning more about becoming a cash buyer, schedule an appointment with a Homeward Advisor here. 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. There are several things you can do to help achieve this: Weve hinted at it above, but lets be clear: Sellers often have a very different view of option periods than buyers do. Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. All the Sugar Land Real Estate Market Stats You Need To Know the Best Price for Your Sugar Land Home (Since Tax Appraised Values Do NOT Equal Market Value in Texas!) Any legal or other information found on this page or at other sites to which we link, should be verified before it is relied upon. 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. HomeLight, Inc. 100 1st Street, Suite 2600, San Francisco, CA 94105. I assist with inspections, repair negotiations, home warranties, HOA compliance inspections, hazard insurance, surveys, appraisals, title commitment, home warranties, title company, and more. 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. The earnest money and the option fee are credited to you at closing, explains Bacak for buyers who move forward. If the market is very competitive, a higher earnest money percentage may be warranted to make your offer more attractive. References. . You may need to pay a secondary option fee to get the seller to concede. d. You will not post any information intended to sell or advertise a business, product, or service. A seller with multiple offers wants the best price in the shortest amount of time. If the buyer chooses to terminate, the EMD would be refunded, but the seller would retain the option fee. Unless the contract states otherwise, earnest money is due within 3 days of the contracts Effective Date. Often times the renegotiation will include having the seller make the repairs or concessions based on items found in the home inspection. Elsewhere, the number of days could be shorter or longer than 17, but across the board, the contingency period ends when the buyer submits a contingency removal form. If you do not exercise your option (and continue the purchasing process), then the option fee is usually applied toward your closing costs. Use TRECs Amendment to the contract (TXR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. The median home price in Texas is $420,000. So basically, the termination option is a clause that allows buyers to legally cancel an executed contract. What date should I put here? Case law in Texas dictates that the option fee can be no greater than 1% of the home's sale price. 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. Your agent will deliver both checks to the appropriate party and get a written receipt for proof, within 3 days of executing the contract. A great real estate agent can help a buyer navigate the option period and make the most of it. We researched the details and talked with an expert Texas real estate agent to help you make the most of an option period. How much will my adjustable rate mortgage payments be? This is compensation for the time and effort theyve wasted and the need to relist their home. 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. Im looking out for you every step of the way and keeping my eye on the listing agent, the seller, the builder (if applicable), the lender, the inspector, and the title company. For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. In the state of Texas, an option period allows a buyer to get these details before making the final choice. All photos, images, and videos on this website are copyrighted and may not be downloaded or reused without the written permission of Sheila Cox. 6 of the Top We Buy Houses for Cash Companies in Kissimmee, What to Do When You Cant Afford Home Repairs and Need Help, 18 House Hunting Tips From Real Estate Experts, 5 of the Top We Buy Houses for Cash Companies in Amarillo, terminate the sale at any point during the allotted time, "5 Steps to Optimize Your Home Buyers Option Period," Stonebriar Property Inspections (June 2021), "Option Period," Legacy Texas Title (May 2021), "What is an Option Fee in Real Estate?," Close Concierge (July 2021), "Hot Markets, Cool Practices," Texas Real Estate Center (August 2021), "How to Deal With Inspection Reports Provided to a Seller," Texas Real Estate Commission (May 2019), Final negotiated terms between buyer and seller. The standard form most agents use is the. If the buyer terminates the contract, the seller can often keep the earnest money. Sellers take the dollar amount and the duration in consideration when deciding on which offer to go with. There are several options for paying Texas earnest money: The title company can choose which funds it accepts. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. In some areas, the typical earnest money deposit is a flat amount such as $1,000 or $5,000 regardless of the purchase price. A general rule of thumb is the earnest money is refundable to the buyer if the. View helpful videos on my YouTube channel, Texas Real Estate Commissions Information About Brokerage Services. Texas REALTORS is committed to advocating for a strong real estate industry, advancing a culture of continued learning, and staying ahead of issues . Something went wrong while submitting the form. As a buyer, its important to understand when and how you can back out of a contract and keep your earnest money. The home will revert to option pending on the market and sellers can only accept backup offers during this time. Yes. The buyer must submit the TREC Release of Earnest Money form with the contract termination. The earnest money will be returned to the buyer, but the option fee is forfeited to the seller. Most real estate transfer contracts contain an option fee, though it's not a legally binding requirement. The buyer would still receive back the earnest money deposit (EMD) placed down at signing, usually between 1% and 3% of the sale price. This form must be signed by the seller and buyer and delivered to the title company. Plus, my proprietary House Report (see sample) includes the data and information you need to ensure that you are making great home purchase. 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. Generally, the option provides the buyer time to do their due diligence on the property. This may include retaining or refunding the earnest money. 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. Option Period: What Is It When Buying A Home. Youll want to strike a balance by making sure you have enough time to get the information you need, while also finalizing the deal as soon as possible to give the seller the certainty they crave. Its unique in a sense that my out-of-state buyers ask about it more than anything else. For example, if your client's effective date is January 22 with a 10-day option period, the option period will end on February 1. The average earnest money deposit nationwide is 1% to 2% of the purchase price but 3% in California. Ultimate Guide to Sugar Land (eBook), DOWNLOAD When calculating deadlines for my buyer in the One to Four Family Residential Contract (Resale), should I include weekend days or federal holidays? Texas markets where multiple offers are common may have higher expectations. This fee makes the option period more worth a seller's time. If either party prevents the transaction from closing on time, outside of issues the contract specifies allow the closing date to be extended, the non-defaulting party can exercise their rights under Paragraph 15. Share insights and experience. The Texas Board of Insurance which governs title companies in the state only requires that companies accept good funds. Many title companies will not accept a large sum of cash for the earnest money deposit. You make the most of an option fee is forfeited to the seller to the. An expert Texas real estate Commissions information About Brokerage Services which funds it accepts a,! 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