When the sale of real estate takes place, a certain amount of time might be allotted after a contract is created but before the transaction is finalized during which the buyer may decide not to follow through with the deal set forth in the contract. This ‘option period’ allows buyers to have a property inspected and its value ascertained without the risk of losing the property to another buyer.
What Happens When The Option Period Takes Place
Typically, a buyer must pay an option fee in order to be able to enjoy the luxury of an option period. During the option period, property inspections are typically carried out on the property in question so that the buyer can be sure that the proposed offer is appropriate. The nonrefundable option fee that the buyer pays the seller so that the seller agrees not to follow through on a transaction with another prospective buyer compensates the seller for the time during which the property is off of the market.
Differences Between Various States And Provinces
It is not always possible for a buyer to have an option period during which he or she can finalize plans to make a purchase on a property. Regulations and procedures between different states and provinces vary significantly.
It is worth noting that the state of Texas is an area with a real estate market that is particularly well known for granting option periods. In Texas, the option period usually lasts between seven and 14 days and serves as a period of time during which inspections are carried out; however, other states and Canadian provinces have different ways of dealing with option periods and scheduling inspections.
The particular laws applicable where a sale takes place will often dictate how much a buyer needs to pay to the seller in option fee charges. In the state of Texas, the option fee is usually no greater than 1 percent of the sale price of the home. The option fee is normally applied to the transaction at escrow closing in the event that the buyer decides to proceed with the sale.
Buyers who decide not to purchase a property after the option period has already begun will usually be responsible for paying the option fee to compensate the buyer for lost time. However, the buyer will be under no further contractual obligations.
If you have questions on the processes and regulations involved in a real estate transaction, reach out to Clean Green Real Estate today. We are here and happy to help.