In case you haven’t heard, here in Texas we like to do things bigger & better, and real estate is no exception to that rule. One case in point has to do with the way to do inspection periods when we buy a house. Most states have just that – an “inspection period.” In Texas, we have something bigger and just a little better (IMHO) called an “option period.” An option period is defined in paragraph 23 of the One to Four Family Residential Contract (Resale) as “the unrestricted right to terminate this contract.” Yup, you read that right …“unrestricted.”
How is that like an inspection period?
Great question! An option period is typically 7-10 days. The contract requires that the seller allow the buyer access to the home during reasonable times for the purpose of inspections. So we take the option period as a time to do those inspections. Then it logically follows that the buyer would ask for some list of repairs to be made although it should be pointed out that it’s not required to ask for repairs. The seller can choose to do some, none, or all of the repairs. We now have another round of negotiating. If the buyer isn’t happy with what the seller ultimately agrees to do then the buyer can terminate the contract (prior to the end of the option period) and have their earnest money refunded to them.
Why not just call it an inspection period?
This is how it’s bigger and a little better (for the buyer, anyway). If the buyer wakes up the day after executing the contract and decides that they’ve made a horrifically awful mistake then the buyer can terminate the contract (and get their earnest money back). Maybe the house the buyer always wanted comes on the market 4 days into the option period. They can terminate and go after their dream house. You get the idea, right? It’s a pretty darn powerful paragraph in the contract.
What’s the catch?
The buyer must pay an “option fee” to the seller for this right. Typically that fee is ~0.1% of the price of the house although I’ve seen it as little as $10. The amount is a negotiable point in the contract (as is the length of the option period). That fee MUST be delivered to the seller within 2 days of the execution date of the contract, AND the option fee is forfeited if the buyer exercises their right to terminate.
Of course, if you have any other questions about option periods, inspections, or buying/selling homes in general, let me know. I’m here to help!
How’s that for a disclaimer???