Trudging through Texas Real Estate: What to expect from the Contract Option Period as a buyer or seller
May 18, 2009 at 12:01 am nelsonproject
The option period in Texas contracts is a tool to assist with fair and timely negotiation processes between buyer and seller. It allows a set amount of time for a buyer to perform due diligence and inspect the property while compensating the seller for this lost time in ‘Active Status’ for sale on the market. The option fee (for the option period) is paid up front when submitting an offer, and it is not refundable if the buyer terminates the contract. The option fee is paid in consideration for this initial time under contract, and the home is changed to ‘Pending Status’ in the MLS System because it is no longer actively listed for sale on the market.
The buyer has their negotiated amount of time to inspect the property and understand these findings. Upon final closing of the property, the buyer is reimbursed for the option fee at closing. This comes in the form of a credit from seller to buyer on the Settlement Statement at closing. If the buyer terminates the contract for any reason, the option fee is the seller’s to keep. The amount might also indicate how the seriousness of the buyer’s intent to purchase the home.
Most often, the buyer uses this timeframe to have the property inspected, to check on homeowners insurance for the home, and to understand the results of the home inspection report. We assist buyers in understanding what the report is detailing and suggesting, as well as what the scope and pricing of those projects would look like. We have several reliable professionals we work with to obtain pricing and bids for projects from miniscule in size to quite large in scale. We help our buyers plan for future repairs and understand general maintenance involved with homeownership, and this empowers our buyers to know when a home is right for them. Of course, most basically, we assist the buyer with repair negotiations and requesting repairs from the seller during this time period.
Every buyer wants to move into a solid and mechanically safe home. This means that the roof, foundation, plumbing system, electrical system, HVAC, and hot water heater are in good working condition. This may not mean they are sparkling like new, but they are performing as intended. If something were awry with one of these systems, that is a repair the buyer might request of the seller during the option period negotiations. All repairs agreed upon between buyer and seller are noted in writing, signed by all parties, and the repairs must be completed by closing date, or a date otherwise agreed upon in writing. This agreement in writing takes place on a form called the ‘Amendment to the Contract’ in Texas real estate.
To a seller, the option period is not the most anticipated event during the home purchase process. Sellers often feel invaded during the inspection process. Who wouldn’t when a person you do not know is combing through the systems of your home looking for imperfections? Sound horrible? Well, it doesn’t have to be horrible for a seller!
If you’ve ever put off a ‘honeydo list’ of pesky home repairs, getting to those can be essential if you are getting ready to put your home on the market for sale. Be it the list of chores you’d do for your spouse, or if the in-laws were coming to visit, that distant and overly avoided list of to do’s need to be done.
If all of these descriptions sound unfamiliar, this is also the list The Nelson Project will give you when you are getting ready to list your home on the market for sale. Do not negate the importance of this list. Changing out air filters, stopping minor leaky faucets, replacing the dryer vent, tightening the loose toilet bolts, mulching the garden…attending to these details can save you so much headache, and possibly heartache in the end! Our proactive sellers have better experiences time after time during contract negotiations, and during option period negotiations.
Outcomes of the option period are typically an agreed upon list of repairs, or an allowance for repairs. When a home is found to be in tip top shape, sometimes the option period is only there for the buyer to make certain of that fact. On the most exquisitely maintained homes, one item or another will be noted by the inspector, so don’t let that be a surprise.
– provided by our consistently talented contributor & Closing Coordinator, Heather Hill
© Julie Nelson and The Nelson Project at Keller Williams Reatly, 2008-2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Julie Nelson and The Nelson Project at Keller Williams Realty with appropriate and specific direction to the original content.
Entry filed under: Fix It, Smart Buyers, Smart Real Estate, Smart Sellers.