We’re in the Option Period! What Does That Mean?

The negotiating is done, the contract is signed… but don’t open the champagne yet, we’re just getting started!

The day after the contract is signed by all parties the termination option period begins. This is a time, set up in the contract, that is can be used by the buyer to have the property fully inspected and negotiate repairs with the seller. If repairs cannot be negotiated, or the buyer wants to back out of the contract for any reason during this time, they can (I’ll explain more in a minute). It is not required that the buyer have an option period, but it is definitely common practice here in the San Angelo area. I would strongly advise my clients against ever waiving their option period/inspections on a home purchase. Skipping this part of the process and giving up time to inspect a house properly could be extremely costly in the end!

The Termination Option part of the contract covers 4 questions: Is there an option period? How many days is it? How much is the buyer paying to have one? What Title Company or Escrow Agent is the Check to be made out to? Normally, what I see is yes, there is an option period. It is usually 7-10 days and the buyer paying anywhere from $50-$250 for the option period (depending on the price of the home being purchased and other factors). The option money that the buyer pays is a credit off of the sales price (in the buyer’s favor) at closing.

Day 1 of the option period starts the day after everyone signs the contract and it is executed. During the option period, the buyer is able to get the house inspected, typically by a general inspector and pest inspector. If any issues arise or we have further questions, then we can call in specialists for those areas i.e. roofer, plumber, electrician, etc. It is also wise during this time to go ahead and check with your insurance agent and make sure that the house is insurable.

After inspections, and during the option period, the buyer may want some items repaired that came up on the inspection reports. The buyer’s Realtor will be able to advise on if certain repairs will be required for the type of loan the buyer is obtaining. If there are repairs that the buyer wants the seller to complete, an amendment to the contract is written to reflect those changes. If the buyer and seller cannot come to an agreement, or the buyer would like to back out of buying the house for any other reason (only during the option period) the buyer can terminate the contract. All negotiations or termination need to be completed and signed before the 5:00 pm deadline on the last day of the option period. Any earnest money already deposited at the title company would be returned to the buyer. The buyer’s option money would remain with the seller for their time and taking it off the market. Also, remember that the buyer would still be responsible for paying the inspectors for their time.