It provides security for the buyer by giving you the chance to terminate the purchase contract for any reason whatsoever without risking your good faith deposit. The length of the option period and the option fee are negotiable between the buyer and the seller. The "option" in Texas real estate is an agreed upon number of days in the one to four family residential contract (purchase contract) that allows for the buyer to back out of the contract for any reason. A wire transfer is the most common and safest way to make your good faith deposit. . Amanda Brown is a licensed real estate agent with the State of Texas. Austin has a median home price of $656,000 thats $6,500 to $13,000 to put down 1-2% as a good faith deposit! The median home price in Texas is $420,000. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. At closing, the earnest money deposit is credited toward closing costs and/or the down payment. Madeline Sheen is an associate editor for HomeLight who works with an amazing team of experts in home buying, personal finance, and mortgage to create articles for HomeLights Buyer Resource Center. $500 for five days has become my go-to when Im competing with other contracts and low inventory, Bacak explains. How much will I need to save for a major purchase? Last Updated May 17, 2018 It's the last day of my buyer's option period. You should contact an attorney or licensed CPA to obtain advice with respect to any particular issue or problem. Texass option period is not mandatory and could affect a buyers offer being accepted as the seller could view it as inconvenient. Before inspections, you may fear the state of the home or the sellers willingness to negotiate repairs if the home needs serious work. If the deal falls through for any reason, who gets the earnest money will depend on the provisions of the contract. If the buyer opts to renegotiate the contract, they send the amended contract to the listing agent to discuss it with the seller. On the contract is an option period that allows you time to schedule an inspection. If the buyer decides to back out of the sale after the option period because of a low appraisal (and the lender will not lend what is needed to purchase the property) or a financing issue, and the appraisal and financing contingencies have not been released, the buyer will still lose the option fee, but will be refunded their earnest money deposit. Agents Compete, You Win. Tell me exactly what you want, and I can narrow down your options better than any search you have access to. The option period can also be extended for an agreed-upon number of days. Average for the last 12 months. . The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. (Option fees typically range from $100-$500. Find a top real estate agent in your area to help you buy your dream home. You should contact your attorney to obtain advice with respect to any particular issue or problem. Work with an expert buyers agent to help you understand this key purchase contract component, so you have the time you need to make your decision. While the option is clearly laid out in the contract, most buyers want to know more about it before they even begin their home search. As a good rule of thumb, buyers should be prepared to put down the average earnest money amount Texas sellers expect no more, but definitely no less. If the seller does not fix objections within 15 days, the contract is terminated and the earnest money is returned to the buyer. Often times the renegotiation will include having the seller make the repairs or concessions based on items found in the home inspection. [email protected] or 832-517-0988. During the option period in Texas, the home status changes from active to option pending, and the seller cannot sell the property to another buyer during that time, although they can take backup offers. In fact, during the option period you can terminate the contract for any reason. The length of the option period and the option fee are negotiable between the buyer and the seller. (Download my Ultimate Sugar Land Guide), Great DataI will give you the most in-depth data you have ever seento help you make the wisest decisions. Share with your sellers these tips on how to live in a show-ready house Issues Mobilization and Political Advocacy Assessment, TACS Texas Accredited Commercial Specialist, TAHS Texas Affordable Housing Specialist, TRLP Texas REALTORS Leadership Program, TRLS Texas Residential Leasing Specialist, TRPM Texas Residential Property Manager, Sales of Million-Dollar Homes in Texas Report. However, there's an extension when the deadline is on a weekend or holiday. My team of experts is ready to help you achieve your goals. The Texas real estate contract option period is in place to provide protection to the buyer. For that reason, its not a process that should be rushed. Travis county: Home to Austin, Texas' capital, and is situated in south central Texas. Sellers usually favor offers with a good faith deposit because they do not want to waste their time with a deal that falls through. If these inspections result in potential home repairs, the option period also provides time for repair estimates to be obtained and any additional contract negotiations (due to needed repairs) finalized. A seller with multiple offers wants the best price in the shortest amount of time. There are several options for paying Texas earnest money: The title company can choose which funds it accepts. Learn everything you need to know about the home-buying process. c. You will not post content or take any action on our blog posts that infringes someone elses rights or otherwise violates the law. Any and all inspections that you want to have done to the home must happen before the end of the Option period. If this contingency was waived by the buyer, the deposit is forfeited if financing falls through. In fact, some modestly priced homes only include option fees of $100. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. Generally, the option provides the buyer time to do their due diligence on the property. Keep in mind that option periods are specific to Texas and other states will have different processes that give buyers the time they need to make the final decision. Depending on the local market conditions and norms, the average earnest money amount may be a flat amount such as $500 to $2,000 or a percentage of the purchase price, usually 1% to 2%. Yes, Texas real estate closing laws allow earnest money to be returned to the buyer in many circumstances. An option period gives the buyer a specific amount of time to have the property inspected and decide if they will continue with the purchase. In most markets, you would put down $1,000 to $4,200 in earnest money. HomeLight, Inc. 100 1st Street, Suite 2600, San Francisco, CA 94105. Candid AdviceI promise to give you candid advice on all homes and areas so you can make the best decisions. Creekview Realty notes that the option fee is usually $100 and the period is seven to 10 days. If there is a structural inspection contingency, it typically states that the buyer can only back out and have the earnest money released if the inspection finds a single defect that would cost at least $1,500 to remedy. Here are quick answers to common questions about earnest money Texas buyers, sellers, and real estate agents have. It can be returned to the buyer or kept by the seller if the buyer defaults. Both the option periods fee and duration are negotiable. If your client's ability to perform under a contract (i.e., close the transaction) is contingent upon the closing of another property, the Addendum for Sale of Other Property by Buyer (TAR 1908, TREC 10-6) should be made part of the contract. This is compensation for the time and effort theyve wasted and the need to relist their home. Amanda operates under the brokerage of Coldwell Banker Realty. Keep in mind that the seller keeps the option money if the buyer backs out of the contract. I am the local neighborhood expert who can give you a professional and accurate Current Market Analysis (CMA) to tell you what your Sugar Land home is worth today. The standard contract allows for damages if either party wrongfully fails to sign the release or wrongfully challenges it. You are allowed to back out of the contract for any reason during your option period but you will lose your option fee to the seller. This is often done by paying an additional termination-option fee. In addition, if you find any defects that you cannot live with, then you must negotiate the repairs, or change in price, before the end of the Option period. Home | FAQ | Blog | Mortgage Calculator | VA Loans | Terms of Use | Privacy Notice, 2710 S Clear Creek Rd Ste 115 Other states use different terminology to refer to a similar period of time typically used for inspections and other contingencies: In many states, contingencies are taken care of before the purchase contracts are signed, which negates the need for a formal option period. I see that Paragraph B of the Addendum for Back-Up Contract (TAR 1909) is for the contingency date when the first contract has to terminate or else the back-up contract terminates. Yes. Wire transfer fraud is a growing problem that can be hard to spot! Need a painter, electrician, mover, insurance company, etc.? Like (5) Dislike. Header Image Source: (Jeremy Doddridge / Unsplash). All information on this website is subject to change and should be independently verifiedespecially before making decisions based on this information. The option money is a non-refundable fee, but it can be applied to the sales price of the home after closing. Typically in this period the home buyer will coordinate for a thorough home inspection and any other inspections they like. Finding a buyers agent like Bacak will help you navigate these waters to make an attractive offer that also gives you the time you need to make your decision. This is when I triple check taxes, schools, aerial maps, sex offenders in the area, flood zones, etc. How Much Does It Cost to Build a House in 2023? I assist with inspections, repair negotiations, home warranties, HOA compliance inspections, hazard insurance, surveys, appraisals, title commitment, home warranties, title company, and more. Texas escrow law does not require earnest money and a contract is valid without it. In the state of Texas, an option period allows a buyer to get these details before making the final choice. However, its usually expected by sellers and an offer may not be accepted without it, especially if there are multiple offers. It is almost like an undo button. The termination option ends at 5 p.m. local time to where the property is located. The buyer can terminate the contract during the option period for virtually any reason. However, Sheila Cox and Keller Williams assumes no liability or damages due to typos, errors or omissions. I will help you narrow your options and find the best neighborhood for you based on your specifications. Most real estate transfer contracts contain an option fee, though it's not a legally binding requirement. The buyer can request this form be signed if they wish to back out with cause or if the seller has defaulted on the contract. Will the buyer have to pay another option fee even though the extension is because the seller breached the contract? If neither party wishes to, the contract is terminated and the deposit is refunded to the buyer. Typical contingencies for land purchases include: That the buyer can obtain suitable financing typically within 30 days, or longer if you are using a construction loan to finance both the land and construction. Phone: (832) 779-2890. An option period means the buyer can terminate the contract during the agreed-upon time frame without any particular reason being given. So you must be ready to get your inspections ordered ASAP. The buyer can take advantage of this option to complete a few checks for their peace of mind. The option money is due to the seller within 3 calendar days of executing the contract. 5.0. Be sure to carefully read the language of the contract. (View helpful videos on my YouTube channel). With so many contingencies, communications, and deadlines to manage in even a simple real estate transaction, its easy for real estate agents to get overwhelmed. In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . This low fee is paid to have an option period during which you can enter the property, perform due diligence, and have the home inspected. The home will revert to option pending on the market and sellers can only accept backup offers during this time. If the contract has a generous inspection contingency, the buyer can back out of the deal before the deadline passes if they are unhappy with anything turned up during the inspection. Do not exclude weekdays and holidays from the count if the Effective Date is a Thursday, Friday is Day 1 and Saturday is still Day 2; the weekdays are not skipped to make Monday Day 2! and delivered to the title company. The buyer would still receive back the earnest money deposit (EMD) placed down at signing, usually between 1% and 3% of the sale price. Want to learn more about everything that goes into the home-buying process? What happens if buyer does not deposit earnest money? Earnest money is not required to make a valid Texas real estate contract. If there is something I didn't answer for you or if you have additional questions, please reach out to me. Killeen, TX 76549, Gatesville, Harker Heights, Temple, Nolanville, Killeen, Belton, Salado, Copperas Cove, Lampasas, Kempner, McGregor, Valley Mills, Lorena, Woodway, and Evant. Free shipping for many products! The option period begins the day after the effective date of the contract. How much will my adjustable rate mortgage payments be? It depends on why the deal failed to close. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. Texas REALTORS provides content through various online platforms, including this blog. Don't overlook the importance of the option period. hbspt.cta._relativeUrls=true;hbspt.cta.load(20424362, 'e9dcb309-7259-4f5d-aa74-c702513a4917', {"useNewLoader":"true","region":"na1"}); Visit https://www.nmlsconsumeraccess.org/to verify UpEquity as a financial services provider.UpEquity is a licensed mortgage company in these states.UpEquity SPV2 LLC DBA UpEquity (NMLS #2101265).Parent company LnderLab, Inc. DBA UpEquity (NMLS #1849773), 3100 Alvin Devane Blvd. Shorter option periods generally benefit the seller and longer option periods benefit the buyer. A few common contingencies that are often included in real estate offers include: Due diligence is essential when it comes to buying a home. Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? Applicability of the legal principles discussed in this material may differ substantially in individual situations. How much will my fixed rate mortgage payment be? They support agents by taking time-consuming, detail-specific, and deadline-oriented tasks related to contracts off of their plates. Another point of security is that the seller cannot make any other deals during the option period. VA loans) that require the home to be in a particular condition. If the buyer is more motivated to purchase the home, they may sweeten the pot with a higher amount and shorter option period. Gain access to our suite of customizable marketing assets for agents. Updated January 2023 People always ask me, , I Have the Best HomeSearch Available Yes, I know you can search for homes on the Internet on your own, but no online searches available to the general publicincludingHAR, Trulia, Zillownone of them will allow you todo thecomplicated searchesthat I canperform with my custom home search. Earnest money is one of many important aspects of a Texas real estate transaction. Since Paragraph 5A, the Delivery of Earnest Money and Option Fee Paragraph, uses the word withinwhen describing the time period, Day One of the option period is the day after the effective date of the contract. Your real estate agent can advise you if your offer has a good chance of being accepted without earnest money, but it may be hard to get your offer taken seriously without putting down a good faith deposit. Its unique in a sense that my out-of-state buyers ask about it more than anything else. Putting down too little or forgoing the good faith deposit entirely can even be insulting to a seller or make them think the buyer isnt serious or financially secure. View helpful videos on my YouTube channel, Texas Real Estate Commissions Information About Brokerage Services. She has published content on The Balance, The Balance SMB, Thrive Global, and other smaller publications on topics ranging from personal finance and entrepreneurship to lifestyle and real estate. Use TRECs Amendment to the contract (TAR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. Please share this info with your Friends! If youre ready to take the next step toward homeownership, chat with a radius loan officer today to discover your options. This requires paying a small option fee. Heres what agents and buyers need to know about earnest money in Texas including guidelines on the typical Texas earnest money amount and when it must be deposited. A general rule of thumb is the earnest money is refundable to the buyer if the seller terminates the contract or the buyer backs out with cause allowed in the contract. Yes, a Texas real estate contract is still valid even if earnest money is not required or if the buyer has not made the deposit. Whats Your Home Worth in Current Market? For example, if your clients effective date is January 22 with a 10-day option period, the option period will end on February 1. 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