The Option Period: Texas Real Estate Explained

What is the Texas Option Period for Real Estate

The standard contract for buying a home in Texas contains a clause for an Option Period.

The Option Period is the time during which the buyer can cancel the contract for any reason, without penalties.

Option Period in Texas

What You Need to Know About the Option Period

The Texas Real Estate Option Period:

  • is at the beginning of the purchase contract period
  • is an agreed-upon number of days between the buyer and the seller, i.e., it is negotiable
  • the option money is non-refundable
  • is given directly to the seller (or seller’s agent) at the beginning of the contract, usually in the form of a personal check
  • must be delivered within 48 hours, regardless of business day or weekend
  • should not be delivered to the Title Company
  • can be extended by mutual agreement between the buyer and the seller, for an additional option payment ( also negotiable)
  • is commonly 10 or so days, to allow time for the property to be inspected and for repair quotes to be obtained
  • can be shorter, or longer – depending on the circumstances and requirements of the buyer and the seller

An Example of How the Option Period in Texas is Used

Still confused about the way the option period works?

Here is a quick example of a Texas real estate contract with an Option Period:

  1. You (the Buyer) write an offer on a house.
  2. The offer includes an 8-day option period for $150 (negotiable!).
  3. Your Buyers Agent delivers the offer and a photocopy of your personal check for the option period (made out for $150 to the Sellers) to the Listing Agent, who reviews the offer with her client.
  4. Your offer is accepted, the Sellers sign the contract and you receive a copy of the executed contract back by way of your Buyers Agent.
  5. Your Buyers Agent delivers the option check to the Listing Agent within 48 hours, and delivers your earnest money check to the Title Company, also within 48 hours.
  6. The Listing Agent gives the option money check to the Sellers who either cash it or deposit it into their own account.
  7. You will not get this money back – you’ve just paid for your option period for the purchase of the house you now have under contract.
  8. Within the 8 days, you get the house inspected, find a few problems and get quotes to get the problems fixed.
  9. Also within the 8 days, you and your Buyers Agent decide what repairs you require and send over an amendment to the Listing Agent with a listing of the repairs you hope will be made by the sellers.
  10. You and the Sellers, by way of your agents, negotiate the amendment.
  11. If you can’t negotiate for updated terms (repairs) on the contract, and you don’t want the house without certain changes, you must cancel the contract in writing before the end of day 8 (regardless of business day or weekend).
  12. If you don’t cancel, you are now out of your Texas Option Period and can only terminate the contract under very specific reasons outlined in your contract.

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  1. Nicole says:

    If you buy an option with a home contact and the inspection comes back with LOTS of BIG $ problems that the buyer and sell can not agree up to fix the correct way. Do you still lose the option money if you pull out in the 10 days? Or, should you wait out the 10 days to get your money back? Especially since the disclosure had none of the problems listed in the house. Is there any recourse for the buyer.

  2. Alison says:

    If you are in Texas, the Option Money is typically non-refundable, although it is often applied towards the down payment if you do end up purchasing the property. The Option money is typically small ($100 to $200) and basically buys you some time to inspect the property and to negotiate for repairs.

    Option Money and Earnest Money aren’t the same thing. Your contract should spell out your rights to cancel and within what timeframe in order to get back your Earnest Money.

    You should call your Buyer’s Agent right away and go over the list of problems from the inspection.

    Generally, if the inspection reveals problems, then you (the buyer) and the seller can negotiate for repairs during the Option period. These negotiations should be completed during the Option period (which is why you paid the Option – to have the time to do this). Any agreements for repairs (or changes to the contract) should be captured in writing on the specific forms required by TREC, and within the timeframe outlined in your contract. It is essential to make sure that you understand the timeframes for compliance with the contract, and that you and your agent work together to get everything in writing from the sellers before the Option period ends. If you do decide to cancel, you need to do that within the time periods written in to your contract as well.

    Good luck!

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