• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Accessibility Statement

Follow Us on FacebookFollow Us on TwitterFollow Us on InstagramFollow Us on YouTubeRSS Feed

Kimberly Howell Properties

San Antonio Real Estate

office@kimberlyhowell.com
(210) 493-6888
  • Blog
  • About Us
  • Agents
  • Buyers
    • Neighborhoods
    • Relocation Information
  • Sellers
  • Listings
    • Available Rentals
    • Homes for Sale
    • McNair Custom Homes
    • Open Houses
  • Contact
  • Rental SearchHomes for Rent
  • REALTORS®Find an Agent
  • McNair Custom HomesNew Construction
  • Property SearchHomes for Sale
You are here: Home / Archives for option period

option period

Why A Home Inspection Is Important

March 6, 2023 by khproperties Leave a Comment

We can’t stress enough how important home inspections are to a buyer. While it might seem like a good idea to save some money when buying a home, the home inspection is definitely not one of the things to cut. This home inspection infographic is a simple straight forward answer to the question, “Do I need a home inspection?

Home Inspection Infographic
 

Have questions about getting a home inspection? Need a recommendation for some excellent home inspectors? Not sure if you need a home inspection? Buying a new home and wondering if you can skip the home inspection? Give us a call and we can help.

Filed Under: Buying a Home Tagged With: buying a home, option period, home inspections, inspections

The Option Period: Termination and Timelines

January 6, 2016 by khproperties 58 Comments

Option Fee

The option period provided for in the Texas residential contract is a negotiable item that gives the buyer the unrestricted right to terminate the contract. It is not required for the parties to have one, but it is common practice here in San Antonio (and is a wise choice for the buyer). Found in Paragraph 23 of the One to Four Family Residential Contract (Resale), it is a relatively simple part of the contract that wields a lot of power. Care has to be taken to follow the timelines closely as missing this one, could be potentially costly to the buyer. As of January 1, 2016, the language in this paragraph has changed and it’s worth taking a fresh look at what is in there.

Paragraph 23. Termination Option

23. TERMINATION OPTION: For nominal consideration, the receipt of which is hereby acknowledged by Seller, and Buyer’s agreement to pay Seller $______ (Option Fee) within 3 days after the effective date of this contract, Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within ___ days after the effective date of this contract (Option Period). Notices under this paragraph must be given by 5:00 p.m. (local time where the Property is located) by the date specified. If no dollar amount is stated as the Option Fee or if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract. If Buyer gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any earnest money will be refunded to Buyer. The Option Fee will will not be credited to the Sales Price at closing. Time is of the essence for this paragraph and strict compliance with the time for performance is required.

This paragraph asks four basic questions – is there an option period, how much is the buyer paying to have one, how many days does it last, and will that money be credited back to the buyer at closing. If the fields in this paragraph are left blank, there will be no option period. The option period is typically used by the buyer as a timeframe in which they can get inspections done and go back to the seller to negotiate repairs. If the buyer and seller come to an agreement on those items, they can sign an amendment to the contract reflecting those changes, but if they cannot come to an agreement, the buyer would have a way to terminate the contract and not lose their earnest money. The buyer would then forfeit their option fee, which the seller would keep. Not being able to come to terms on repairs is not the only reason the buyer could terminate during the option period however. It gives the buyer the unrestricted right to terminate the contract, which means that the buyer doesn’t need a reason to terminate within that timeline, they just have to state they want to terminate (and there are forms with which to do that). The amount of money (option fee) and the length of time (option period) are negotiable items between the parties to the contract. The final question is whether the money will be credited back at closing – typically we see that it “will” be credited. In other words, if the buyer does not terminate the contract, the amount of the option fee is credited to them at the closing table as if they already paid that amount towards the price of the home.

The bolded sentence at the end is quite important…time is of the essence. That phrase is used often in real estate and it simply means that if you don’t meet a deadline, there are consequences. In this case, there are two very important deadlines. The first, is the paying of the option fee. This fee must be paid to the seller within three days of the effective date of the contract (which is written on the contract when all parties sign off on it – just below Paragraph 24 and just above the signature line). If it is not paid within those three days, the option period becomes null and void and does not apply to the contract anymore (as stated in the text of the paragraph). It is important that this is noted as we have seen instances where the option period was removed from the contract because of this.

The other critical timeline, and this has changed on the new contracts as of January 1, 2016, is the timeline for notification of termination. This timeline is negotiable and is filled into the blank in the paragraph – basically, the paragraph states that the buyer will pay x amount of money for an option period of x days. The amount of days is critical as it is tied to the effective date of the contract we mentioned previously, but unlike most timelines, the option period now expires at 5pm (based on the local time of where the property is located). Previously, it expired at 11:59pm (like most contract items). Now, the buyer must either terminate the contract by 5pm or they are considered to be moving on with the contract and no longer have the unrestricted right to terminate the contract. Basically, they just lost their easiest way out of the contract should they decide to not purchase the home.

The new timeline for the expiration of the option period is very critical and it prevents some issues that were occurring with the later time of 11:59pm. It allows for any critical negotiations to occur at a more reasonable time for all parties involved, including the agents who often had to try to work out a deal right down to the wire! The option period is a very useful tool for the buyer and allows the seller some compensation if a buyer does decide to terminate the contract within the option period timeframe. There are times when an option period might not be wanted, longer time periods asked for, or larger option fees are warranted, and we advise you to discuss the different options and methods with your agent to achieve the results you’re after.

image courtesy of 401(K) 2013

Filed Under: Buying a Home Tagged With: option period, termination, option fee

Option Period in Real Estate Contracts

July 31, 2012 by khproperties 1 Comment

Option Period

The option period in the Texas “One to Four Family Residential Contract (Resale)” is one of the greatest protections for buyers built into real estate contracts. It is simple and easy and provides buyers with a chance to terminate the contract with no risk and little financial loss. But what exactly is its function and why do you need to use this when making an offer on a home? This post has been updated to reflect the most recent changes to the option period language in the contract (updated January 1, 2016).

Section 23 – Termination Option

23. TERMINATION OPTION: For nominal consideration, the receipt of which is hereby acknowledged by Seller, and Buyer’s agreement to pay Seller $______ (Option Fee) within 3 days after the effective date of this contract, Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within ___ days after the effective date of this contract (Option Period). Notices under this paragraph must be given by 5:00 p.m. (local time where the Property is located) by the date specified. If no dollar amount is stated as the Option Fee or if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract. If Buyer gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any earnest money will be refunded to Buyer. The Option Fee will will not be credited to the Sales Price at closing. Time is of the essence for this paragraph and strict compliance with the time for performance is required.

As you can see, there are three negotiable points to this paragraph – time, money, and whether or not that money will be credited back to the buyer at closing. These three points can be anything – or the entire paragraph can be skipped (and the option period waived, although we don’t recommend it).

The purpose of the paragraph is to provide the buyer with the unrestricted right to terminate the contract. The unrestricted right simply means that the buyer doesn’t need a reason to terminate the contract – they have the option to terminate the contract for any reason. Typically, it is used to give buyers time to inspect the home and negotiate any repairs they might want done to the home before they continue on with the purchase.

The time and money provisions of the option period are completely up to the buyers and sellers. Typically here in San Antonio you will see a request for 10 days for $100. The option fee check (in this case $100) is written by the buyer directly to the seller. When the contract is agreed upon, the seller may cash the check immediately. The choice that the money will be credited back to the buyer at closing is usually the preferred checkbox at the end of the paragraph.

Once the option period begins, buyers may perform inspections on the home to determine if there are any necessary repairs. The seller does not have to agree to do those repairs, so it becomes a negotiation point once again. If both parties can not come to an agreement during the option period, the buyer may elect to use their unrestricted right to terminate the contract with no penalty other than the loss of the option fee (which they paid directly to the seller). The buyer may also cancel the contract just because they feel like it or because they realize they don’t like the home or because it’s a Tuesday – basically, for any reason. All they lose is the option fee (in the case mentioned above, $100). They do not risk losing their earnest money if the terminate within the option period.

Option Period – Protect Yourself

The option period and the protection it provides are very useful in real estate contracts. Have you ever heard of “buyer’s remorse” – it’s a real thing and we have seen it happen before. Even without a reason like that, the option period is essential when getting inspections – it allows for time for them to be done as well as time to negotiate what repairs the buyer may want the seller to do. Do yourself a favor and be sure and get an agreed upon option period when buying a home – without it, you have one less way you can terminate the contract if you are not happy with the home.

Note: Many bank-owned homes or those involved in relocation will not provide an option period. Many however will provide an inspection period which functions in the same basic way. Always read the related addenda to a contract (your agent should point these out – if not, you need a new real estate agent) and know what all of your options are for potential termination of the contract – not that you want to cancel, but there’s always a chance something will pop up that will give you a need to cancel.

image of contracts courtesy of the CJ Sorg

Filed Under: Buying a Home Tagged With: buying a home, option period, contracts

Primary Sidebar

Why It Makes Sense to Move Before Spring

Why It Makes Sense To Move Before Spring

Spring is usually the busiest season in the housing market. Many buyers wait until then to make their move, believing it’s the best time to find a home. However, that isn’t always the case when you factor in … [Read More...] about Why It Makes Sense To Move Before Spring

Home Values

Have Home Values Hit Bottom?

Whether you’re already a homeowner or you’re looking to become one, the recent headlines about home prices may leave you with more questions than answers. News stories are talking about home prices falling, and … [Read More...] about Have Home Values Hit Bottom?

Home Equity

3 Ways You Can Use Your Home Equity

If you’re a homeowner, odds are your equity has grown significantly over the last few years as home prices skyrocketed and you made your monthly mortgage payments. Home equity builds over time and can help you … [Read More...] about 3 Ways You Can Use Your Home Equity

Best Practices for Selling Your House

3 Best Practices for Selling Your House This Year

A new year brings with it the opportunity for new experiences. If that resonates with you because you’re considering making a move, you’re likely juggling a mix of excitement over your next home and a sense of … [Read More...] about 3 Best Practices for Selling Your House This Year

Median Asking Rent

Avoid The Rental Trap This Year

If you’re a renter, you likely face an important decision every year: renew your current lease, start a new one, or buy a home. This year is no different. But before you dive too deeply into your options, it … [Read More...] about Avoid The Rental Trap This Year

Search Our Site

Real Estate Topics

  • Buying a Home
  • Homeowner Tips
  • KHP News
  • Local Events
  • Local Laws
  • Miscellaneous
  • Mortgages and Financing
  • Open Houses
  • Real Estate
  • Real Estate Market
  • Renters and Landlords
  • San Antonio Places
  • Sell Your Home
  • Technology
Our real estate agents can help you with properties anywhere in Texas. If you need assistance finding agents in other parts of the country, please contact us.

Search Homes

Explore Cities

  • Alamo Heights 34 Listings
  • Bandera 417 Listings
  • Blanco 201 Listings
  • Boerne 773 Listings
  • Bulverde 456 Listings
  • Canyon Lake 524 Listings
  • Castle Hills 18 Listings
  • Castroville 106 Listings
  • Cibolo 360 Listings
  • Comfort 66 Listings
  • Converse 637 Listings
  • Fair Oaks Ranch 63 Listings
  • Floresville 268 Listings
  • Garden Ridge 5 Listings
  • Helotes 160 Listings
  • Hill Country Village 5 Listings
  • La Vernia 187 Listings
  • Lakehills 150 Listings
  • Leon Valley 12 Listings
  • Live Oak 80 Listings
  • Mico 128 Listings
  • New Braunfels 1466 Listings
  • Olmos Park 9 Listings
  • San Antonio 10909 Listings
  • Schertz 305 Listings
  • Seguin 677 Listings
  • Selma 73 Listings
  • Shavano Park 25 Listings
  • Spring Branch 458 Listings
  • Terrell Hills 28 Listings
  • Universal City 96 Listings
  • Windcrest 26 Listings
  • Hollywood Pk 5 Listings

Stay up to date with the latest from Kimberly Howell Properties.

San Antonio real estate and property information provided by Kimberly Howell Properties. Kimberly Howell Properties does not assume any liability or responsibility for the operation or content of any of the linked resources, nor for any of the interpretations, comments, graphics, or opinions contained therein. All information deemed reliable, but not guaranteed.

KJH Properties, Inc. is a licensed real estate brokerage in the State of Texas, Equal Opportunity Employer, and supporter of the Fair Housing Act.

TREC Information About Brokerage Services | TREC Consumer Protection Notice | Privacy Policy

All content © 2009-2023 Kimberly Howell Properties, unless otherwise noted.