In some states, such as Texas, buyers have to pay an option fee in addition to making a serious deposit of money. The buyer cannot recover the option fee if he decides not to sell the house, even if he withdraws for a reason covered by a contingency in the contract. Option fees are usually applied to the final sale price of the home. If the inspection reveals serious problems or the seller does not deviate from the terms of the contract, you are free to leave the sale without any effect – you are allowed to change your mind. Another security point is that the seller cannot make any further trades during the option period. If a buyer decides that he wishes to include the option period in a real estate contract, it will be used exclusively to have the opportunity to exercise the right to terminate the contract for any reason without risking the serious deposit of money. During the option period in Texas, the status of the home changes from “asset” to “pending option,” and the seller cannot sell the property to another buyer during that time, although they may accept backup offers. When buying a home in Texas, you should make the most of this time to make sure the property doesn`t have any major issues. To set up an option period, the buyer must pay a minimal option fee to the seller, usually around $100.
This number is negotiable, as is the number of days in the option period. Buying a home is an exceptional financial investment, and a change of mind could have a significant impact on your finances. Understanding the contractual elements of a real estate transaction is important to protect yourself and your investment. An option period is an agreed period of time after the buyer and seller have signed the real estate contracts, during which the buyer can terminate the contract for any reason without risking their earned money. Serious money is the good faith money that buyers put in escrow when they submit their offer to show that they are serious about buying the property. An option period is included in a real estate contract to give a buyer a certain number of days in which they can terminate the contract and get their deposit refunded. It is designed to give the buyer time to learn more about the home through independent inspections and reviews, negotiate repairs and other contractual elements, and be approved for financing when applying for a mortgage. The buyer pays a non-refundable fee to the seller, called the option fee, which is the fee for that exam period and is typically between $100 and $200. Q. I am on the eighth day of my 10-day notice option period and the seller still hasn`t activated utilities so I can have the property inspected. The seller has promised to have the utilities next week, so I want to extend the notice option period by an additional 10 days.
Do I have to pay any other option fees even if the renewal is due to the seller`s breach of contract? Here`s everything you need to know about the option period and how it can help you. The duration of the option period and associated fees vary depending on the buyer`s offer and are included in the offer to the seller. The option period is designed to allow the buyer a certain number of days to ensure that there are no problems with the home and that they feel comfortable as they move forward. What is an active option contract and how does it differ from other types of residential contracts? Below we explain everything you need to know about active option contracts. The length of the option period depends on what has been agreed between the seller and the buyer. A shorter period of time and higher fees are more likely to appeal to a seller, so buyers who compete for homes tend to offer as few days as possible. Like an inspector, the appraiser will judge the house, but he is not interested in finding damage or wear on the house. Instead, the appraiser simply looks at the value of the home based on similar homes that have been sold in your area. They make a list of comparable homes and then adjust the prices they think you`re going to sell based on several factors, such as. B all the features you have added to the house and the general condition of the house. The appraiser uses this information to determine what they think is a fair price for the house and provides the bank with a report that usually lasts between 2 and 7 days. If a buyer wishes to terminate the contract during the option period, he must inform the seller before 5 p.m.m .m local time (where the property is located) on the day of the end of the option period.
If the sale price is higher than the estimated value, you may need to wager more money to meet the lender`s down payment requirement. When this happens, you will either have to raise the funds, negotiate with the seller to reduce the selling price, or terminate your contract. If this scenario occurs and your evaluation returns during your option period, you can withdraw from your contract without losing your money. In the past, the review of option fees could be issued directly to the seller, but as of April 1, 2021, the Texas Real Estate Commission has adopted a revised set of contract forms. Under the new rules, buyers must “remit the option fee to the securities company, not the seller.” The option fee must be paid within three days of the entry into force of the contract, unless the third day falls on a weekend or public holiday, in which case the deadline is extended until the end of the first full working day. Buyers also have the option to deliver the option money with the serious money or separately. The issue of funding is linked to the issue of evaluation. If you get a loan to pay for the house, you also need to get the exam and you can`t get the exam until you`ve signed a contract for the house. So, even if you get pre-approval for mortgage financing, you should still consider valuation time when determining your ideal option period. TIP: The option period is a great security for buyers. A person can terminate the contract for any reason during this period without risking serious money.
Your state`s laws dictate how much you pay for an option period if you have one. In Texas, the non-refundable cost for an option period is typically 1% or less of the sale price. This is usually applied when closing the escrow account when you make the purchase. If you decide not to buy the property, the seller will keep the option fee and you will be released from all contractual obligations. With or without an option period, you probably won`t have any cost for building inspection if you decide not to buy a property after the inspection or simply change your mind. One. After receiving your inspection report, you and your buyer`s agent must list the repairs you or your lender need and send a change to the listing agent. With FHA and VA loans, there are certain repairs that sellers must legally repair. An experienced broker can advise you on the ® necessary repairs.