The option period and the option fee in Texas
Draft Pending review by a Texas title professional before it is final.
Most Texas home contracts give the buyer a short window to back out for any reason, in exchange for a fee. It's when inspections and repair talks happen. Here is how it works for both sides.
Updated
What it is
Most Texas home contracts give the buyer an option period: a set number of days after the contract’s effective date during which the buyer can end the contract for any reason — or none — by giving the seller written notice. The buyer pays an option fee for that right. Both are in ¶5 of the TREC contract.
For the buyer, it is time to inspect the home and decide. For the seller, it is the stretch of the deal when the buyer can still walk away without losing the earnest money.
The option fee
The option fee is an amount the two sides agree on and write into the contract, along with the number of days. Under the current TREC contract the buyer delivers the option fee to the escrow agent — the title company — together with the earnest money, within 3 days after the effective date (¶5).
If the sale closes, the option fee is credited toward the price. If the buyer doesn’t deliver it on time, the buyer doesn’t get the right to end the contract for any reason.
How long it lasts
The number of days is negotiated like everything else. They count from the effective date: the day the last party signs and that acceptance is delivered. The buyer’s notice to end the contract must arrive by 5:00 p.m., local time where the home is, on the last day of the option period. The contract treats these times strictly.
Inspections and repairs
The buyer usually hires a home inspector licensed by the Texas Real Estate Commission, and may bring in others: a foundation engineer, a roofer, a pest inspector. The contract has the seller keep the utilities on and give access for inspections.
If the inspections turn something up, the buyer may ask for repairs, a lower price or a credit at closing. The seller can agree, counter or say no. Anything the two sides agree to goes into a written amendment signed by both (form 39-11). If they can’t agree, the buyer can still end the contract before the option period runs out.
If the buyer ends the contract
If the buyer gives notice of termination in time, the contract ends: the seller keeps the option fee, and the buyer gets the earnest money back. The title company releases the money as the contract says. Earnest money explains how that release works.
After the option period
Once the option period ends, the buyer can no longer walk away for any reason. The contract can still end for the reasons it names — for example if the buyer’s loan isn’t approved within the days the financing terms give, if title problems aren’t cured, or if one side doesn’t do what the contract requires. A buyer who walks away outside those reasons can lose the earnest money.
The rest of the way to closing — the title commitment, the survey, the loan — is in the survey and the T-47 and what happens at closing.