When buying your first home in Texas, it is important to understand the option period and the rights that come to you because of it. Here is how one page defines the option period.
The Option Period is the time during which the buyer can cancel the contract for any reason, without penalties.
Some other things to know about the option period. The option period begins the day the contract is executed and ends on the last day of the agreed upon time period. For example, if you have a ten day option period that begins on August 1st. The option period will end August 11 at 5 pm. The non-refundable check has to go directly to the seller (or through the seller’s agent) within 48 hours of the contract’s execution date. Finally, it can be extended for more time if both parties agree and money has to be exchanged for the extension. Please know that the option period does allow you to end the contract for any reason as long as it falls within the designated agreed upon time. When buying your first home, you might wonder why someone would terminate a contract during an option period. Here are three solid reasons for a person to exit an option period.
Too many repairs – When buying your first home, it is important to remember that the option period gives you an opportunity to thoroughly check out the home you want to buy. You will get it inspected, and as I have written before, you will always have an inspection report with issues about the house. All homes will need repairs. Too many repairs is a great solid reason to terminate a contract during an option period. The buyer’s challenge is to figure out what is their limit on the amount of repairs needed. If the repairs mention a wide array of structural challenges (foundation, roof), it is up to the buyer to decided whether to stay in the contract or walk away from the property. If you decide to pursue it further by submitting a repair amendment, what is the minimal you will accept from the seller? Will you accept the seller doing the bare minimal on the repairs? If you are asking for an allowance or sales price correction, what is the bottom figure you will accept from the seller? What about the small repairs like leaky faucets, or carpets with holes in them? As a buyer, you will need to figure out your tolerance level for these small repairs. Of course, if the property has more than repairs then you feel comfortable than it is best to forgo all the stress of dealing with the seller and terminate the contract.
Buyer’s Remorse – When buying your first home, you should never feel buyer’s remorse. It is fine to have buyer’s remorse if you buy something small from a store. You can just take the item back to the store for a refund. Once you get through option period, whatever buyer’s remorse you might feel, you will have to live with it. Because if you try to terminate the contract after the option period is over, you will be defaulting on your contract, which means you stand to lose your earnest funds and even face the possibility of legal action. If you are feeling any kind of buyer’s remorse, the option period is the only time you can act on it without causing a lot of trouble for yourself. On the other side of the coin, however, it is important to examine where you are in your house hunting. Is this first house you have found after months of looking? Are you in a seller’s market where homes are few and far between? If the answer is yes to either of these questions, you might want to ask yourself if buyer’s remorse is really a solid reason to terminate a contract. If you want to get a house, you might have to swallow the feeling of regret that sometimes comes with large purchases.
Life Changes – The final solid reason to walk way during an option period is if you encounter any life changes meaning you will not be able to move forward with the purchase of the home. If you have a job loss or any other an event that causes your finances to change dramatically, you will need to walk away from the property. Why? You have already been qualified for that mortgage by the mortgage professional. When buying your first home, this is often misunderstood. The preapproval, or prequalification, process only initially qualifies you for the mortgage. The mortgage company will look at your information again as you draw closer to the closing date to ensure nothing has changed about your financial situation. This is also why you should not go out and buy furniture for your new home before you close on it. These type of purchases will be noticed by the mortgage company, which might change your situation enough that you no longer qualify for the mortgage. There are still other life changes that are solid reasons for walking away during the option period like the unexpected additional to your family, like a child or a parent moving in. You might need to get a larger home to accommodate the new family members. A death to a spouse or other loved one might take too much time away from your ability to carefully look over the property during the option period, which means you will need to walk away. Basically any life changes that hinder your ability to carry forward with the purchase of the home are good reasons to walk away from a property during an option period so you can get your earnest funds back more easily and the seller can put the home back on the market.
We have covered three solid reasons for you to exit a contract during the option period. Too many repairs mean that your home might not be worth purchasing. If you have a life change, you will need to examine the wisdom in moving forward with a contract. Finally, you should never have buyer’s remorse about purchasing a house. If you do, it is best to get out during the option period versus waiting.