The typical option fee in Texas is $100 with a 7- to 10-day option period. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. Sellers are free to reject offers that include option periods or to make counter offers without option periods. To get the privilege of having an option period as a homebuyer, you'll pay an option fee to the seller. The option period ends at 5 pm central standard time on the last day of the option period. The length of the option period is negotiable and it may be as short as 5 days. If the seller fails to complete repairs or treatments that have been agreed upon, or repairs are not done by an authorized or licensed person with the required permits, the buyer can extend the closing date or terminate the contract and have the deposit refunded. How much will my adjustable rate mortgage payments be? 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. Earnest money contracts are also called option contracts for this reason. Option period can be extended, but generally these are due to other factors. Typically, you must pay a fee to set up an option period. 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. Header Image Source: (Jeremy Doddridge / Unsplash). I can filter out , Accurately pricing a home takes more than a three-minute look at current sales numbers by a computer algorithm. We strive to make our website accessible to everyone. But be warned: Every option period and extension comes at a price. The number of days set forth for the option period is negotiable, but typically, anywhere between 1 and 10 days. 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. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. Whichever name is used, know that its referring to the same thing: a finite period of time designed to give you peace of mind as a homebuyer. 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. Utilize an agents expertise in negotiation, offer a short option period, and up your option fee. 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. 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. Has an agreed-upon number of days. Like (5) Dislike. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. DOWNLOAD the HOWS the SUGAR LAND REAL ESTATE MARKET Report TODAY! 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. As a buyer, the option period allows you to include contingencies in your offer and address any concerns you might have before finalizing the contract. In hotter markets like Austin and its suburbs, earnest money amounts of $3000, $5000 and more are not uncommon. Traditionally, the option fee was paid to the seller. Can be extended by mutual agreement of the buyer and seller. I know my buyers termination option ends on Thursday, but at what time? Don't overlook the importance of the option period. Earnest money is not required to make a valid Texas real estate contract. 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. Here is what happens to earnest money in common scenarios. , not the seller, within 3 days of the effective date. This may include retaining or refunding the earnest money. It is almost like an undo button. Thinking about buying or selling real estate? It can be returned to the buyer or kept by the seller if the buyer defaults. How do I determine the last day to terminate under my clients 10-day option period in the One to Four Family Residential Contract (Resale)? Something went wrong while submitting the form. However, other regions have similar processes that support the buyers decision. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. Once it is received, the earnest money will be released back to the buyer. The Texas Real Estate Option Period: Provides security for the buyer. Free shipping for many products! In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . For example, states such as North Carolina and Georgia have a due diligence period that works in a similar way. by Five-Star Real Estate Agent SHEILA COX, We handle inspections in a very unique way in Texas. NO other agent in the world does this! But dont be confused the fee is also a win for buyers whether or not they back out! The option period is crucial for the buyers process; it creates time for making one of the biggest decisions in a homeowners life. This is the same deadline as the earnest money deposit. For example, a court may find that $1 does not satisfy legal requirements. The earnest money will be returned to the buyer, but the option fee is forfeited to the seller. 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. 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. Understanding the contractual elements in a real estate transaction is important to protect yourself and your investment. Some back-up buyers may want to have their contract terminate within days if the first contract doesn't terminate early, while others may want to retain their back-upcontract rights until after the last possible date that the first contract might close. Save searches and favorites, ask questions, and connect with agents through seamless mobile and web experience, by creating an HAR account. 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. Texas Real Estate Commission Information About Brokerage Services | Texas Real Estate Commission Consumer Protection Notice, Amanda Brown Realty with Coldwell Banker Realty 2021 | Designed and Maintained by Arbor Green Design, Amanda Brown Realty with Coldwell Banker Realty 2021 | Designed and Maintained by, extend the option period with additional compensation, How to Find a Real Estate Agent | First-Time Home Buyer Help, Cedarbrook Ridge Estates: Harker Heights, TX, Estancia West: Upscale Living in Killeen TX, From the Pro: How to Buy Land From a Neighbor, Texas Real Estate Commission Information About Brokerage Services, Texas Real Estate Commission Consumer Protection Notice. Heres why: Option periods are baked into residential real estate contracts in Texas for a number of reasons. Keep in mind that option periods are specific to Texas and other states will have different processes that give buyers the time they need to make the final decision. In some areas, the typical earnest money deposit is a flat amount such as $1,000 or $5,000 regardless of the purchase price. Most residential real estate contracts in Texas include an option period. An option period can be extended if the seller agrees. When youre buying a home, zip your wallet! Sellers take the dollar amount and the duration in consideration when deciding on which offer to go with. A general rule of thumb is the earnest money is refundable to the buyer if the seller terminates the contract or the buyer backs out with cause allowed in the contract. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? Shes worked in the mortgage industry since 2019 and holds a BA in Communications from California State University, Monterey Bay. Earnest money is refundable, and it's paid to the escrow agent to hold in escrow, not to the seller. The three most common things that happen during this period include: A home inspection is a thorough examination of a home by a licensed home inspector. This fee makes the option period more worth a sellers time. As of January 2016 the option period time ends at 5 p.m. on the final day of the period. 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. When a buyer submits an offer on a home they can request an option period in exchange for a dollar amount. Thebuyer may decide to exercise their right to terminate if they are not satisfied with the condition of the property after receiving the report(s). Connect with a top agent to find your dream home. 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. The property will be placed in OP (option pending) status in the MLS. 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. For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. for residential purchases to clarify when does earnest money need to be deposited. 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! What happens if buyer does not deposit earnest money? Extensive case law in Texas suggests that the buyer must offer something of value to the seller to ensure that the extension is legally enforceable. This is the extra due diligence I do for you, to make sure that you are getting a great home. On the contract is an option period that allows you time to schedule an inspection. Rachel Leigh Gross is a freelance writer and editor based in Providence, Rhode Island. A wire transfer is the most common and safest way to make your good faith deposit. If the transaction doesnt close and the deal falls through, do you get your earnest money back? An option period is a short window of time after your offer is accepted during which you take a closer look at your new home.If you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit (EMD) back from the seller. Austin has a median home price of $656,000 thats $6,500 to $13,000 to put down 1-2% as a good faith deposit! Excess screen time can lead to exhaustion and stress. In most markets, you would put down $1,000 to $4,200 in earnest money. Your submission has been received! The length of the option period and the option fee are negotiable between the buyer and the seller. 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