What is the Option Period?

What is the Option Period?

The Option Period, also called the Termination Option, is a negotiated period during which the buyer has the unrestricted right to terminate the contract for any reason and receive a refund of their earnest money. The buyer is not required to provide a reason.

This protection allows buyers to investigate the property before committing to the purchase. Buyers typically conduct inspections, evaluate repairs, obtain estimates, review property conditions, and complete other due diligence during this time.

Is an Option Period required?

No. The Option Period is optional, but Realty Texas strongly recommends that buyers consider obtaining one. Without it, a buyer may have limited rights to terminate without risking their earnest money.

How much does the Option Period cost?

Both the option fee and the number of days are fully negotiable between the buyer and seller. There is no required amount or standard duration.

The option fee should represent meaningful consideration rather than a symbolic amount. One suggested starting point is approximately 10% of the earnest money.

Example: On a $500,000 home, earnest money might be $5,000 (1% of the sales price), and the option fee might be $500 (10% of the earnest money). These amounts are examples only and are fully negotiable.

When is the option fee due?

The buyer must deliver the option fee to the title company within three days after the contract's effective date, subject to the contract's delivery provisions. Failure to deliver the fee on time can result in the loss of the unrestricted right to terminate.

The option fee is generally nonrefundable, even if the buyer terminates. If the transaction closes, the original option fee is credited toward the sales price. Certain contract provisions may provide for its return.

When does the Option Period expire?

The Option Period begins the day after the effective date and expires at 5:00 p.m. local time where the property is located on the final negotiated day.

To terminate, the buyer must deliver written notice to the seller before the deadline. The deadline does not automatically extend for weekends or holidays.

If timely termination notice is not delivered, the unrestricted right to terminate expires. The buyer's earnest money may then be at risk if the buyer subsequently fails to perform under the contract.

Can the Option Period be extended?

Yes, if both parties agree. An extension should be documented in a written, executed amendment before the existing deadline, typically with an additional negotiated option fee.

Important Reminder

The Option Period is a critical contractual deadline. Buyers should complete their due diligence early enough to review findings, negotiate repairs if necessary, and make an informed decision before the deadline. Inspections, repair negotiations, and pending amendment requests do not automatically extend the Option Period.