Maybe you are a first time home buyer or you just have some confusion about what a termination option period is, but you have come to the right place for some basic knowledge.
A termination option, or “option period” is very common in real estate. It can be found in paragraph 23 in the One to Four Family Residential Contract promulgated by the Texas Real Estate Commission (TREC), as seen below.
So basically, the termination option is a clause that allows buyers to legally cancel an executed contract. It is almost like an undo button. To receive this option, the buyer pays a fee allowing them the right to terminate their contract during a defined period of time.
Now, the termination option is not a required part of a real estate contract, but most buyers make it a part of their offer. Both elements of the option are negotiable: the amount of the fee and the number of days the option period will last. Your Realtor® can help you decide what is appropriate for your circumstances or situation.
What is its purpose?
The option period, gives the buyer and opportunity to cancel the contract for any reason, and still get their earnest money back. The period allows for a home inspection or any other evaluation that need to be done on a home before a buyer fully commits. One important thing to know, is that a buyer can terminate a contract for any reason, during the option period, as long as they give proper notice during the specified time period in the contract.
What happens if the buyer does not terminate?
If the buyer doesn’t terminate the contract during the option period, the transaction moves ahead and the option fee is typically credited to the sales price at closing or as negotiated in the contract.
If you are in the Houston market, please contact me if you need a qualified Realtor® to help you buy, sell or lease a home.
Jordan Marie Schilleci
Jo & Co. Realty Group
(Please do not mistake this post for legal device. An attorney should be consulted for legal advice.)