aaaand where’s the money going?
Option Money is a negotiated amount of money that is offered to the seller for the exclusive right to terminate an existing contract on a home, in a specific amount of time. This money is due to the Title company within three days of the contract being signed by both parties (an executed contract).
LET’S BREAK THIS DOWN FURTHER
As a buyer, you have looked and fell in love with a home. Congratulations, it is time to make an offer! While walking through the contract you determine you would like to offer $200 (the Option Fee) to the seller for an Option Period of 7 day. This means you, as the buyer, are asking for 7 days to have the right to cancel the contract for any reason. In return, you are paying the seller $200 for pulling the home off the market for any other buyer for 7 days. The days and amount of money can be negotiated until both parties agree and the contract is signed by both parties.
DURING THE OPTION PERIOD
While under “Option” the buyer can have inspections, and look further at the property to determine if they want to move forward purchasing the property. Inspection reports can be used to further negotiate repairs or sellers concessions. If for any reason the buyer chooses to not move forward with the purchase, they have by 5pm on the negotiated day to notify the seller of termination. If they do not want to terminate, the sale moves into Pending status.
SPECIAL NOTES
Buyer: This money is NOT refunded like earnest money. This is what I like to say, “pay to play.” It is also negotiable depending on the market. I have had buyers offer $100 and I have had buyers offer $500.
Seller: This money is not “on top” of the offer price. So if the buyer offers $100 as option money on a $400k home, you are not receiving $400,100. This money will be credited to the sales price at closing, although you can withdraw it from Title before closing.
Knowing how to navigate and skillfully construct a contract is where an agent stands out from others, and frankly earns their commission. So as always, if you are looking for your own trusted agent in Texas , I would love to meet for coffee (or your choice of beverage) to discuss how I can be that for you!
