Amanda Brown is a licensed real estate agent with the State of Texas. What Is an Option Fee? My client wants to submit a back-up offer on a property thats already under contract. At HomeLight, our vision is a world where every real estate transaction is simple, certain, and satisfying. In other states, you can include contingencies in your offer and make sure theyre addressed before closing day. There are several options for paying Texas earnest money: The title company can choose which funds it accepts. The seller promised to have the utilities on next week, so my buyer just wants to extend the termination-option period another 10 days. For example, if the contract is executed on July 15th, the option period then begins on July 16th. Thats because option periods are called different things in different places. Earnest money is money put down as a deposit with a Texas real estate purchase agreement. The median home price in Texas is $420,000. After changes made in 2018, Texas law requires that your real estate agent delivers the earnest money within three days that the signed purchase contract is executed. Traditionally, the option fee was paid to the seller. This includes a professional CMA when you are ready to purchase a specific homeso you dont pay too much. If you waived this contingency, you will need to surrender the deposit if you cannot fulfill the contract due to financing. Thank you! I assist with inspections, repair negotiations, home warranties, HOA compliance inspections, hazard insurance, surveys, appraisals, title commitment, home warranties, title company, and more. 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. By paying this fee, you're purchasing the right to back out of the purchase for any reason during the option period. In most markets, you would put down $1,000 to $4,200 in earnest money. Often times the renegotiation will include having the seller make the repairs or concessions based on items found in the home inspection. Its a sign of good faith that a buyer intends to follow through with their offer and purchase the property. Shes worked in the mortgage industry since 2019 and holds a BA in Communications from California State University, Monterey Bay. 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. However, Sheila Cox and Keller Williams assumes no liability or damages due to typos, errors or omissions. No representations or warranties, either expressed or implied, are made to the accuracy of the information herein, or with the respect to suitability, usability, feasibility, merchantability, or condition of any property or neighborhood herein. If you do not exercise your option (and continue the purchasing process), then the option fee is usually applied toward your closing costs. Utilize an agents expertise in negotiation, offer a short option period, and up your option fee. In Killeen, typical earnest money amounts range from about $500 to 1% of the purchase price . Otherwise, the buyer risks default under the contract if he fails to close because the sale of . Most real estate transfer contracts contain an option fee, though it's not a legally binding requirement. On average, a Texas divorce without children costs about $15,600, and one with children costs about $23,500. 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. Earnest money contracts are also called option contracts for this reason. Find top real estate agents in these similar cities, HomeLight has an A+ rating with the The term option period is specific to Texas. The purpose of this grant is to improve educator quality and effectiveness by offering financial support to educator preparation programs that would like to explore and/or pilot an educator certification assessment that is performance-based, content-specific, and grade-band specific in the form of funds for the purchase of exam vouchers. Making their services extremely sought after by new and experienced agents alike., Transactly Acquires TC Solutions, LLC Further Expanding National Network of TCs Transactly, a rapidly growing Real Estate Transaction Platform, has announced the acquisition of TC Solutions, LLC based in King County, Washington. In general, the shorter your option period, the more attractive your offer is to the seller. 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! NOTE: The $200-400 Option fee is paid directly to the sellerusually via a personal check. hbspt.cta._relativeUrls=true;hbspt.cta.load(7043426, 'ab249a57-2fdf-4f5e-83f8-c65c29e9a946', {"useNewLoader":"true","region":"na1"}); Subscribe to the radius blog using the form below. Unfortunately, if youre trying to buy a home in a competitive real estate market, you may have to forfeit your request for things like a home inspection if you want a seller to accept your offer. What is a Kick-Out Clause, and How Can You Avoid It? Just like you do about that oat milk latte. If the lender requires any repairs or treatments, such as termite treatment, neither party is obligated to pay for it. This is where an option period becomes key even if your choice is to back out of a sale, youll feel better having decided that on your timeline. In summary, the Option period gives you time to have the home thoroughly inspected and find any defects that you cannot live with. amanda@mimsrealty.com or 832-517-0988. [citation needed] The number of days and the amount of the option fee, like sales price and earnest money, are among those features negotiated between a seller and potential buyer in the sale contract; in Texas, option fees typically range from $100 to $200, while earnest money ranges from one to several thousand dollars. This is the extra due diligence I do for you, to make sure that you are getting a great home. Once the seller accepts your offer, they take their home off the market and do not entertain other offers. An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. Yes. Ends at 5 p.m. local time. In some areas, the typical earnest money deposit is a flat amount such as $1,000 or $5,000 regardless of the purchase price. Texas REALTORS provides content through various online platforms, including this blog. This is the same deadline as the earnest money deposit. (View helpful videos on my YouTube channel). It's a good faith deposit that shows serious intent to buy the home. Here's What To Know. While Texas REALTORS has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, Texas REALTORS makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here. Being careful with your offer is crucial in a hot market, and the option period gives you the space to reflect on one of lifes greatest decisions. That said, its important to recognize that while paying the option fee and including an option period provides more reassurance, asking for too much time may make your offer less competitive.. What if the seller refuses to release earnest money in Texas? The standard contract now states: Within 3 days after the Effective Date, Buyer must deliver $__ earnest money to __, as escrow agent, at __.. My job is to protect you from defective homes as much as possible while helping you make a sound financial investment. Agents usually advise clients put down earnest money to make sure their offer is considered. Agents need to be careful about calculating this due date. Earnest money is refundable, and it's paid to the escrow agent to hold in escrow, not to the seller. 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. Youll want to strike a balance by making sure you have enough time to get the information you need, while also finalizing the deal as soon as possible to give the seller the certainty they crave. 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. It also allows time to negotiate repairs with the Seller. The Option Fee may or may not be credited to the buyer'scosts at closing. Please note that data on this website is derived from various sources and every effort is made to ensure the accuracy. For real estate agents and transaction coordinators, its one of many details to oversee that can delay closing or even cause a deal to fall apart. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. An option period usually comes at the cost of a non-refundable option fee on the buyers side. Option period can be extended, but generally these are due to other factors. Earnest money is not required to make a valid Texas real estate contract. Reasonable shipping cost. $500 for five days has become my go-to when Im competing with other contracts and low inventory, Bacak explains. Im going to , EVERYTHING YOU WANT TO KNOW ABOUT SUGAR LAND TEXAS, 1650 Highway 6, #350, Sugar Land , TX 77478 (, Ultimate Guide to Sugar Land Texas Save Time & Effort, Hows the Market in Sugar Land Texas? Any and all inspections that you want to have done to the home must happen before the end of the Option period. 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! You must offer something of value if the option and extension periods are to be legally enforceable. As of June 2022, the median sales price in Travis county was $665,000. The average option fees range from $100 to $500 - depending on the terms of the contract, where the property is located, and the number of days in the option period. If the seller fails to complete repairs or treatments that have been agreed upon, or repairs are not done by an authorized or licensed person with the required permits, the buyer can extend the closing date or terminate the contract and have the deposit refunded. It also compensates the seller for their time as you do your due diligence on the house. No questions asked. This fee makes the option period more worth a sellers time. Do note that the seller doesn't get your earnest money right away, even if your offer is accepted. If a third party such as the buyers agent deposits the funds on behalf of the buyer, Texas escrow rules require they sign a Third Party Deposit form. How do we do that? Buy your first home this year: Perform a Financial Checkup An option period is a portion of time, agreed upon between buyer and seller, which permits the buyer to think on a purchase 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%. Note that the inspection contingency is frequently waived in hot markets. If you purchased a home in Texas then youre familiar with the Texas real estate contract option period. The Texas Real Estate Option Period: Provides security for the buyer. The term option period is specific to Texas. However, other regions have similar processes that support the buyers decision. Earnest money in Texas is a seemingly simple line item, but failure to meet specific deadlines can easily cause a deal to fall apart or worse lead to a buyer losing their earnest money or even facing damages. A higher fee and shorter time frame might make the buyers offer more attractive to the seller, and sellers may ask for better terms which could extend the negotiation period. The earnest money will be returned to the buyer, but the option fee is forfeited to the seller. Im available any time for a call or chat if you. The standard TREC contract has default provisions that allow the seller to cancel the contract if the earnest money is not deposited on time. 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. This is when I triple check taxes, schools, aerial maps, sex offenders in the area, flood zones, etc. An executed contract is one where all parties have signed, initialed & money has been exchanged. This good faith deposit is a lot like getting pre-approved for a mortgage before making an offer on a home it reassures the seller they arent wasting their time. I have the expertise to help solve complicated problems that often occur in the process. Its the last day of my buyers option period. Agents Compete, You Win. An option period is a contractual term that gives the buyer an agreed-upon period to weigh their options before making a binding decision. A wire transfer is the most common and safest way to make your good faith deposit. To ensure the extension of the option period is valid, be sure to include an amount the buyer has paid seller for the additional option fee. Read our Ultimate Home Buying 101 Guide. Here are some tips on how to take a break from technology so. Texas REALTORS provides content through various online platforms, including this blog. Starts at the beginning of the purchase contract period Requires consideration - a non-refundable fee paid to the seller called the Option Fee. Learn About the Benefits of Owning a Home Versus Renting, HOME BUYING 101|Sep 23, 2020 12:00:00 PM|by radius financial group. 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. For that reason, its not a process that should be rushed. An option period typically lasts between 7-10 days, but it can be any length of time agreed on by the buyer and seller. During this period, your lender conducts a. It is important that the additional fee obtained by the seller to extend the option period is more than a symbolic gesture. It ends at 5pm on the specified end date. If either party prevents the transaction from closing on time, outside of issues the contract specifies allow the closing date to be extended, the non-defaulting party can exercise their rights under Paragraph 15. If the buyer terminates the contract, the seller can often keep the earnest money. Earnest money is one of many important aspects of a Texas real estate transaction. It is essentially the buyers security. An option period is a short window of time after your offer is accepted during which you take a closer look at your new home.If you find red flags or major issues during the option period, you can terminate the purchase and get your earnest money deposit (EMD) back from the seller. How much will I need to save for a major purchase? All rights reserved. Take a look at a sample House Report that I do for my clients. Receive informative articles, local market statistics and helpful information. For long-term resale value, the neighborhood you choose is just as important as the home you buy. Once the offer is accepted, Homeward conducts a, You buy back the home from Homeward once your new mortgage is ready. If the buyer does not comply with the contract terms, they are in default and the seller has the right to terminate the contract and keep the earnest money deposit. Header Image Source: (Jeremy Doddridge / Unsplash). If you exercise your option (and decline purchasing the home), then you lose your option fee ($200-500), but you get your 1% earnest money back. Whats Your Home Worth in Current Market? Ready to save time on paperwork, ensure transactions close smoothly, and deliver the best experience to your clients? TREC made a change to the standard Texas real estate contract regarding how option fees are paid. NO other agent in the world does this! We implement strict design techniques to achieve WCAG AA compliance. You will not use our blog posts or posted content to do anything unlawful, misleading, malicious, or discriminatory; and. Heres why: Option periods are baked into residential real estate contracts in Texas for a number of reasons. Your lender will use the results of the appraisal to determine how much money theyre willing to lend you for the property., Today there is an appraiser shortage so most homebuyers arent able to get an appraisal during the option period. In certain cases the buyer can negotiate with the seller to extend the Option Period. Sellers are free to reject offers that include option periods or to make counter offers without option periods. Find real estate questions & answers. Theyll help you understand any concerns or necessary repairs so you can address them with the seller before finalizing your purchase contract., Buying a home is a huge investment and your home inspector is an invaluable member of your team. Requires consideration - a non-refundable fee paid to the seller called the Option Fee. 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. You may need to pay a secondary option fee to get the seller to concede. If you dont know what you want, the line disappears too quickly. 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