Option Period

The Texas Option Period ## What Makes the Option Period Unique The option period is one of the most Texas-specific features of the residential real estate contract. During the option period, the buyer pays a negotiated option fee directly to the seller in exchange for an unrestricted right to terminate the contract for any reason. "Unrestricted" is the defining word: the buyer does not need a reason, does not need to have identified a specific problem, and does not need the seller's agreement to cancel. The buyer simply sends written notice of termination before the option period deadline, and the contract is cancelled. Option fee characteristics: - Paid directly to the seller (NOT to the title company or broker) - Paid within 3 days of the effective date (typically) - Non-refundable regardless of the outcome — the seller keeps it even if the buyer terminates on day one - Separate from earnest money Upon termination during the option period: - Seller keeps the option fee (always) - Buyer gets the earnest money back (always, if terminated within the option period) ## The Effective Date — The Starting Point All time-sensitive periods in the TREC contract run from the Effective Date — defined as the date the last party signs AND the fully executed contract (or notice of execution) is received by the other party or their agent. Both elements must exist: execution AND receipt. A contract signed by both parties but sitting unsent has no Effective Date yet. Example: Buyer submits an offer on Monday. Seller signs Wednesday evening. Buyer's agent receives the executed copy Thursday morning. Effective Date = Thursday. ## Due Diligence During the Option Period Buyers…