Last time I wrote, we took a look at the importance of a title company and how there are many more things to consider when putting together an offer than just price.
Today I'm going to take a look at options and how they affect the home buyer.
The option period essentially is the period of time after an agreement is reached when the buyer has the right to inspect the property and determine whether or not to move forward with purchasing the home. During this time the buyer has exclusive rights to the property meaning that the seller cannot go over the buyer's head and accept another offer. During the option period the seller is fully committed to the buyer, while the buyer is not committed to the seller or purchasing the property. The amount of time, option money, and whether the option money will be credited towards the sale price are negotiable in Texas, and agreed upon by both sides. The option fee must be delivered to the seller within 48 hours of an agreement and can be cashed right away.
Typically, we offer the seller $100 for a 10 day option period. The $100 is money that the seller keeps whether or not the transaction closes. You're basically purchasing exclusivity to a property to assess the condition and value. Once an agreement is reached, I would recommend having your inspection done immediately by a reputable and qualified home inspector. By not waiting a few days, you allow yourself time to assess the results of the inspection, get contractors out to look at any issues and negotiate with the seller. It's not uncommon that after an inspection is done to negotiate with the seller to either make certain repairs or adjust the sales price accordingly. I could spend a lot of time on negotiating amendments, however we'll focus solely on the option period.
With foreclosures and institutionally owned real estate being such a large part of the market these days, it's important to consider the difference between an individual seller and a bank-owned property. Many times when purchasing a REO/foreclosure, the buyer is allowed a 7-10 day option period. There are two main differences with these types of transactions. First of all, they generally do not require any option money, but rather just give the buyer exclusive access for the negotiated amount of time. Secondly, they rarely, if ever, make any repairs. That means that with foreclosures and bank-owned properties, what you see is what you get. In rare cases they may be willing to negotiate an amendment to make repairs but these instances are few and far between. The point of the option period here is to make sure there aren't any surprises and that the buyer is well aware of the complete condition of the property they are purchasing.
The option period is generally one of the more stressful times for the buyer. It's not uncommon to have an inspection done, and have a buyer who is extremely concerned. Many times the inspector points out every single issue with the house even if it isn't a major one. The important thing to remember here is no house is perfect, even new construction will have things noted in the inspection. The main things you want to make sure to evaluate are the major systems of the house including roof, foundation, plumbing, electric, HVAC, etc. The high cost items are the ones that can easily turn a great deal into a bad one. I would also recommend only working with a real estate adviser who has gone through the home inspection course. This can save a ton of time, money and stress, as they should be able to point out potential issues with any home. Just remember that every home is going to have bumps and bruises, you just want to make sure there aren't any major surprises.
Wherever you are, make sure that your adviser is able to understand and explain the option period and every other clause in the contract to you. They should be able to advise you on the pros and cons of every decision and make sure that you are fully protected. The best advice I can give on the option period is to not waste time and get your inspections done immediately. Finally, know that this is often the most stressful time of the transaction, but with a well-informed and experienced Realtor you can ensure that you are protected and are getting a great deal!
The Todd Tramonte Home Selling Team