In the Texas One to Four Family Residential contract for a resale, there is a section that is commonly referred to as 'The Option Period.' This section of the contract gives the Buyer a negotiated period of time to cancel the contract for any reason whatsoever. The Buyer must give a negotiated dollar amount as consideration for the option period. The Buyer and Seller can also negotiate whether or not to apply the option fee to closing if the Buyer follows through with the contract and goes to closing. This option period is generally used by the Buyer to get an inspection and perform any due diligence that must be done before entering into the phase of the contract that is very specific on conditions that would allow a Buyer to cancel a contract.
What's a typical option fee?
This number varies greatly depending on the value of the home and how negotiations go. For homes less than $500,000, we generally see this number to be $100 to $500. Homes above $500,000 but less than $1,000,000 generally see option fees from $500 to $1,000.
How long is the option period?
The timeline for the option period hinges on the dollar amount the Buyer is willing to pay for the option fee. The less you're willing to give as an option fee, the less time Sellers will be willing to take the property off the market. Most option periods we see are from 10-14 days. In the markets with higher demand, option periods are for less time and we've seen them tend to be seven days or less.
Can the Seller cancel under the option period?
No. The option period is for the Buyer to have the unrestricted right to terminate.
If the option period expires but the Buyer still cancels the contract later on for another allowed reason, will the Buyer get the option money back?
No. The seller is not obligated to pay this money back to the buyer if the contract does not close.
Termination Option from the Texas Real Estate Commission One to Four Family Residential Contract (Resale)
This contract can be downloaded here: CLICK HERE
Fun fact: This form was updated in 2015 to provide a deadline of 5:00 p.m. (local time where the Property is located), giving an end to 11:59pm contract cancellations and negotiations into the night to squeeze in before midnight.
This content is for informational purposes only and is not intended to be specific advice for your real estate transaction.