What is an Option Period?
In other states, an option period is known as the Inspection Period. While similar, the option period in Texas provides two things: (1) time for the buyer to perform any inspections and (2) the option for the buyer to terminate the contract for ANY reason or for NO reason at all. Maybe the buyer finds another home they like more or they decide not to move. On the flip side, the seller has no option and has no way to unilaterally terminate the contract without being in breach of contract.
Option Period Details
An option period can last any number of days and can cost any amount of money as it is fully negotiable. However, a typical option period ranges from $75 to $250 depending on the price of the home. They range from 3 to 14 days but most commonly are either 7 or 10 days. These are calendar days so weekends count! A seller allows access for inspections during this time, including general home, termite/pest, pool and others as required.
Negotiating During the Option Period
Based on the results of inspections during the option period, a buyer will often request repairs and/or concessions from the seller. These concessions typically involve either a reduction in the sale price or seller paid closing costs to cover some or all of the cost of repairs. These repair requests and/or concessions are presented by the buyer to the seller in the form of an Amendment to the Contract. Assuming both parties agree to the terms of the Amendment, it will be signed, executed and sent to the title company where it becomes part of the contract itself.
Timing is Critical
The option period expires on the agreed upon date at 5:00PM. This change took affect in January, 2016 to address the problems with expiration at midnight - primarily trying to get a buyer and seller to agree and sign off on something at 11PM at night. It is important to know that, if no amendment is signed and executed by the 5:00 deadline, the original contract is valid. If a buyer sends an amendment to a seller and does not get a response, they will either have to terminate the contract (before 5:00PM on the expiration date) or proceed with the original contract terms. If the buyer does not terminate by 5:00PM and tries to terminate later, the buyer will technically be in breach of contract (unless there are other contingencies) and the seller can keep the buyer's earnest money.
Michael Reeder - Owner & Broker