Option Period
By definition, an option period is “the unrestricted right to terminate a contract on a home for any reason within a presented period of time.” In layman’s terms, it is the time between when your offer to buy the home is accepted and the time you must inform the seller of your intent to purchase. The length of the option period is negotiable as agreed upon by the buyer and seller, but the standard time is 7-10 days. An option fee is paid by the buyer as a good faith symbol and will or will not be applied towards the purchase price upon final acceptance. If the buyer terminates the contract, the option fee is forfeited.
Initially, the option period may seem like a time to just relax and think about whether you would like to purchase the home in Houston, but that is not the case. The minute the option period begins, so does the work. It is important to know that per Texas law, the option period ends exactly at 5:00 P.M. on the last day of the period, unless an extension is agreed upon.
Also, REMEMBER that Texas follows the common law doctrine of caveat emptor, or buyer beware. What this means is that the seller has no duty to disclose any problems with the home subject to three exceptions:
- The seller must disclose if he made an affirmative misrepresentation…basically if he lied and knew it.
- The seller must disclose if he has any relationship with the agent…it could cause a legal problem if the seller and the real estate agent are in a business together.
- The seller must disclose if he has taken steps to conceal a condition, such as throwing a rug over water damage.
Other than those exceptions, you may be on your own. Because of this fact, you need to hire inspectors for anything and everything before you buy a house. Check out our Inspections Page for a non-exhaustive list of possible inspections. The standard inspections are: home inspection, termite inspection, mold inspection, HVAC inspection, home plumbing inspection, and an electrical inspection. There are many others that are available to ensure that your home is ready for the move-in date.
WHAT OCCURS DURING AN OPTION PERIOD?
Inspections, reports, and insurance shopping are all events that occur during the option period. Ensure to schedule the home inspections early. Some home inspectors in Texas will provide a report same day while others may take a day or two to compile. After the inspection reports are given to Calvin, he reviews them line by line looking for anything that may cause concern. If something arises, he will demand that the seller address the issue and negotiate an extension of the option period.
Also, during the option period, a buyer will be researching homeowner’s insurance. These quotes usually take a day or two to receive. As with inspections, ensure that you request an insurance quote early in the week to avoid a last minute rush.
WHY WOULD A SELLER AGREE TO AN OPTION PERIOD?
It may seem surprising that a seller would agree to an option period, knowing that the buyer can terminate for any reason. An option period is beneficial to the seller in allowing him or her to keep the option period fee if the contract is terminated or allows him to sell his home to a satisfied buyer. There is no loss for either party. Because there is no real risk to either party, a clause for an option period is standard in most Texas real estate contracts.
If the buyer decides to terminate the contract, the seller must obviously be notified. The buyer must sign and submit the termination document before the expiration deadline of 5:00 P.M. on the agreed upon day.
Calvin Kim will ensure that you receive as much time as you need under the option period. His job is to alleviate the stress and pressure of buying a home. Contact Calvin if he can assist you with your home buying process in The Greater Houston Area.
