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What is an Option Period and Why Do I Need It?

What is an Option Period?

When you buy a house through a realtor in Texas, there’s a section in the contract called the "Termination Option". That’s what we refer to when we say “Option Period”. What it means for a buyer is that for a fee paid directly to the seller, the buyer has the unrestricted right to terminate the contract within the agreed upon number of days. 

This is the only legal option for terminating your contract without cause where you can still get your Earnest Money back. There is no “24 hours to change your mind” law in Texas for real estate contracts, contrary to popular belief. Once you’re under contract, from that moment forward you’re bound to the terms of the contract and your Earnest Money is vulnerable to your non-performance. Plainspeak: the Option Period is your “out” if you simply change your mind.

Why do I need an Option Period?

When you enter into a contract to buy a home, we agents always (always) recommend having at least a mechanical and structural inspection performed on the home by a licensed inspector. It’s during the Option Period that the inspections should take place. Once the inspections are complete and we have the reports, we take what we’ve found to the seller and revisit the contract to address any issues. This is when we renegotiate the price or ask the seller to make repairs before closing. If we reach an agreement with the seller and revise the contract during the Option Period, we simply move forward and the fee Option Fee is typically applied toward your closing costs.

What happens if the seller doesn’t want to make any repairs based on the inspection report?

This is where the Option Fee really earns its value. Remember, you can terminate the contract for any reason during the Option Period, even if the inspection comes back spotless. But if the inspection report finds that there are significant repairs needed to the property and the seller won’t negotiate repairs or a price adjustment, you may terminate the contract within the Option Period and all of your Earnest Money will be returned to you. The Option Fee is kept by the seller in this case.

Is an Option Period required?

An option period is not required. However, I don’t know a realtor in Houston who would tell you not to have one. We highly recommend them. As mentioned previously, an Option Period gives you the unrestricted right to terminate the contract and get your earnest money back. It’s a small price to pay for some peace of mind, especially during one of the biggest purchases you’ll ever make.

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