Jack Stapleton's Daily Blog

What is an option period? This is a time frame that allows a buyer to determine whether or not he or she would like to purchase the property he has written a contract on without the fear of losing his earnest money deposit.

Let’s say that you are purchasing a property for $200,000, but you know nothing about the house…if there are any leaky plumbing problems, foundation problems, etc. You are pretty sure you want the house, but if there is something wrong that can’t be fixed you don’t want to be obligated to go through with the purchase.

This is the time that will allow you to decide.

How long does it last and what can you do during this time? During this time, you will be able to have a home inspection completed, termite inspection and any other type of inspection you feel necessary completed. You will be able to find out if any major repairs need to be made to the property and negotiate those repairs with the seller.

If something comes up that you deem unacceptable to purchasing the property, you have the option to cancel your contract with the seller. If you and the seller decide to negotiate on any terms regarding the repairs or problems that may be present, this is the time to do this. Make sure you are getting everything in writing prior to the deadline of the option period.

If you do cancel your contract during this time, you will be refunded your earnest money deposit in full.
Is the option fee refundable and how much is it? The option fee is non-refundable and is paid to the seller. This is an incentive for the seller to accept your contract and take the home off of active sale status. The home will show as an active option when another sales agent is looking in the MLS. This will tell other real estate agents that there is a contract on the property, but that the contract is contingent upon the buyer exercising his or her option period.

There is not a set amount for an option fee. I have seen them for $25 and $50. But, it is usually a small amount to hold the property for the buyer while he or she makes a decision on whether to purchase or not. Remember that this is non-refundable, so if you decide to cancel the contract you will not get this money back, but you will be entitled to receive your earnest money deposit back in full.

Is there a deadline with an option period? Yes. The option fee is normally paid within a two day period to the seller unless otherwise stated in the contract. You also have the deadline of the option period itself. This can be 7 days, 10 days or whatever has been specified on the contract. Make sure that you and your agent pay close attention to these deadlines. Not exercising them during the specified times can make this option void. Then you will be obligated to go through with your contract no matter what you find out about the property.

Do I have to utilize the option period? No. The option period is strictly voluntary. I believe that an option period is very important if you know little or nothing about the property you wish to buy. Again, it gives you the flexibility of walking away from the transaction if you feel it necessary without losing your earnest money deposit. This is the perfect time to get all of your inspections completed, find out things about the house and generally determine if the property is right for you.

Option periods are a good time to make the important decisions regarding the property you wish to buy. It secures your ability to receive your earnest money deposit back, if you decide that you are unable to or no longer wish to purchase the home. If your real estate agent does not talk to you about it when you are writing your offer to the seller, ask him or her about it. You don’t want to risk losing your earnest money deposit because a home inspection comes back with major problems. You want to be able to walk away if absolutely necessary and take your earnest money deposit with you.