What Is an Option Fee? But be warned: Every option period and extension comes at a price. 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. amanda@mimsrealty.com or 832-517-0988. Therefore, we promote stricteditorial integrity in each of our posts. 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. The buyer has the right to object to the Commitment and Exception Documents within a certain number of days. The purpose of earnest money is showing you are a serious buyer. When buying a home in Texas, you should make the most of this time to ensure the property doesnt have any major issues. Option Period: What Is It When Buying A Home. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. . 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. A wire transfer is the most common and safest way to make your good faith deposit. (Read client testimonials), Local Area ExpertiseThis isnt just my businessits where I work and live (for 20 years) so I really know the area. What is an option period? It provides security for the buyer and the buyer can terminate the. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. However, this doesnt spell the end of your dream home journey. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. The length of the option period and the option fee are negotiable between the buyer and the seller. A seller with multiple offers wants the best price in the shortest amount of time. Every buyer deserves a few days to review the property and decide on the purchase without risking too much financial loss. If you waived this contingency, you will need to surrender the deposit if you cannot fulfill the contract due to financing. Other states use different terminology to refer to this period of time: Once the option period takes effect, the home's status changes from "active" to "option pending." For first time buyers, its often a confusing element and a possible hurdle to buying a home. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. If you purchased a home in Texas then youre familiar with the Texas real estate contract option period. Because there are drawbacks to using a check, including a potential waiting period for the money to clear, you should know how to pay earnest money without a check. $500 for five days has become my go-to when Im competing with other contracts and low inventory, Bacak explains. When you are putting down thousands of dollars, you want to know what happens to your deposit if the deal falls apart and how its credited when the transaction closes. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. However, there's an extension when the deadline is on a weekend or holiday. Usually on the contract you have 7 to 10 days to complete the inspection. 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. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. Transactly Now Affiliated With eXp Realty ST. LOUIS, Mo. Buy your first home this year: Perform a Financial Checkup 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. TREC made a change to the standard Texas real estate contract regarding how option fees are paid. Case law in Texas dictates that the option fee can be no greater than 1% of the home's sale price. As an experienced professional, theyll use their knowledge to help you avoid any major missteps., Home appraisals are typically ordered by your mortgage lender. 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. d. You will not post any information intended to sell or advertise a business, product, or service. 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. (Also see Pricing a Home Correctly), Best Home SearchesYes, you can search on your own, but no other home search available can filter down to the school leveland filter out the subdivisions that may be known to flood. Be sure to carefully read the language of the contract. If the buyer decides to back out of the sale after the option period because of a low appraisal (and the lender will not lend what is needed to purchase the property) or a financing issue, and the appraisal and financing contingencies have not been released, the buyer will still lose the option fee, but will be refunded their earnest money deposit. The option period ends at 5 pm central standard time on the last day of the option period. Buying a home is probably one of the biggest decisions youll ever make. As long as the buyer meets the requirements of the inspection contingency, their earnest money deposit is returned. Theres going to be multiple offers, and to be the best, you need to move rapidly, Bacak shares. Copyright 2021 Sheila Cox. The buyer also has the option to ask the seller to make repairs or reduce the purchase price. Share insights and experience. If you do not exercise your option (and continue the purchasing process), then the option fee is usually applied toward your closing costs. The option period begins the next day after the contract is executed. During this period, your lender conducts a. An option period usually comes at the cost of a non-refundable option fee on the buyers side. Check out p. 27 regarding the sample Flood Map info I provide. In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . Building A, STE 100, Austin, TX 78741, Get estimates for repairs or revisit the contract, Apply for financing if you're not yet pre-approved or approved to. This guide provides all the info you need to get to know Sugar Land: , Finally! (Option fees typically range from $100-$500. 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. When you use our Buy with cash or Buy Before you sell solutions, youll benefit from our Dual Appraisal Advantage. Texas escrow law does not require earnest money and a contract is valid without it. 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. 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. At the end of the Option Period (and the timing is very strict) you can do one of the following: Make sure you hire a real estate agent who knows how to properly handle Option Periods and protect your money. You don't want to end up with a house that's not worth the value you paid. They won't, however, get their option fee back. Here are some tips on how to take a break from technology so. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. 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. It works the same way with either program:, Traditionally, homebuyers have had to choose between moving quickly and having peace of mind. The standard form most agents use is the. If youd like more information regarding the Texas option period I would love to hear from you. An option period usually comes at the cost of a non-refundable option fee on the buyer's side. For a seller, the goal is usually to lock in the best offer on their property as soon as possible. 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. Make sure you ask your agent about the consequences if you plan to waive any contingencies to strengthen your offer! Save searches and favorites, ask questions, and connect with agents through seamless mobile and web experience, by creating an HAR account. Like (5) Dislike. Learn everything you need to know about the home-buying process. The non-refundable fee is paid to the seller (usually about $100). 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. 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. 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. Home | FAQ | Blog | Mortgage Calculator | VA Loans | Terms of Use | Privacy Notice, 2710 S Clear Creek Rd Ste 115 The option allows the buyer to back out or renegotiate based on this new information. The inspection will also yield estimates for any repairs, which you can use to renegotiate the homes sales price. The average earnest money deposit nationwide is 1% to 2% of the purchase price but 3% in California. While there is not a set duration for the option period, typically they range from 7-10 days on average. The option period begins the day after the effective date of the contract. The buyer may choose to back out of the deal during the option period and still get their earnest money back. This is the same deadline as the earnest money deposit. Keep in mind, that may be difficult to schedule a home inspector in such a short amount of 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. It's also home to The University of Texas' main campus. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. The term option period is specific to Texas. However, the more competitive the real estate market, the more important it becomes. By paying this fee, youre purchasing the right to back out of the purchase for any reason during the option period. Be Aware of These 15 Tenant Rights. If the inspection uncovers serious issues or the seller wont budge on the contract terms, youre free to walk away from the sale without any repercussionsyoure allowed a change of heart. In general, the shorter your option period, the more attractive your offer is to the seller. For long-term resale value, the neighborhood you choose is just as important as the home you buy. Grant Period From February 23, 2022, to August 31, 2023. The option period starts the day AFTER the contract is executed. This lets us know how we can best help get your client started with Homeward. 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. Earnest money is money put down as a deposit with a Texas real estate purchase agreement. A few common contingencies that are often included in real estate offers include: Due diligence is essential when it comes to buying a home. Typical contingencies for land purchases include: That the buyer can obtain suitable financing typically within 30 days, or longer if you are using a construction loan to finance both the land and construction. Applicability of the legal principles discussed in this material may differ substantially in individual situations. Information you provide when registering will be shared with the account owner and host and can be used and shared by them in accordance with their terms and privacy policy. View helpful videos on my YouTube channel, Texas Real Estate Commissions Information About Brokerage Services. This low fee is paid to have an option period during which you can enter the property, perform due diligence, and have the home inspected. You may dread the idea of an additional fee, but its worth it. The option period begins the day after the contract is signed, and both buyer and seller are contractually obligated to carry out those terms. 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.. Gain access to our suite of customizable marketing assets for agents. Im going to , EVERYTHING YOU WANT TO KNOW ABOUT SUGAR LAND TEXAS, 1650 Highway 6, #350, Sugar Land , TX 77478 (, Ultimate Guide to Sugar Land Texas Save Time & Effort, Hows the Market in Sugar Land Texas? The option period is crucial for the buyers process; it creates time for making one of the biggest decisions in a homeowners life. Im available any time for a call or chat if you. Connect with a top agent to find your dream home. What Does Contingent Mean In Real Estate? After the inspection, your home inspector will issue a detailed report on the condition of your new home. The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. Find a top real estate agent in your area to help you buy your dream home. The option period can also be extended for an agreed-upon number of days. It means you can back out of the purchase if youve discovered something ugly or move forward with a home thats been held for you during your decision-making. Use TRECs Amendment to the contract (TXR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. If you have questions or issues with accessibility, please contact us. Amanda operates under the brokerage of Coldwell Banker Realty. If you use a check, the funds must clear before the earnest money is considered deposited. I can filter out , Accurately pricing a home takes more than a three-minute look at current sales numbers by a computer algorithm. 5.0. Something went wrong while submitting the form. At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying.

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