What in The World is an Option Fee?
You are buying your first home and you have finally found that perfect house you have been looking for. All parties have agreed on price and terms of the purchase and a contract has been signed. Two fees are due from the buyer after signing of the contract.
1. Earnest or Deposit for purchase
2. Option Fee
Most first time home buyers don’t know what the option fee is for and why they have to pay it. In Texas Residential contracts, buyers for a nominal fee paid to the seller purchase the unrestricted right to terminate the contract within a set period of time agreed by both parties. If buyer chooses to terminate the contract within this period, earnest money will be refunded to the buyer and seller will keep the option fee. Typically the buyer will inspect the property during this period and will renegotiate price and necessary repairs with seller. So far so good, right?
Well, here is the caveat. In order for this time period to take effect and be in place, the option fee has to be delivered to the seller or seller’s agent within two days of the signed contract. If option fee is not delivered in time, buyer will not have the unrestricted right to terminate the contract and buyer’s earnest money could be in jeopardy if buyer decides to walk away for any reason. Your Real Estate agent should advice you on this and collect the fee from you and deliver in a timely manner. Make sure the fee is not dropped off at the Title Company, they are not the sellers or seller’s agents, they are only facilitating the closing process between the two parties.
I had this situation on two of my listings this past year. So if you are buying make sure you are working with an agent that knows and keeps track of all the crucial dates and time lines of your contract.
Drop me a line or contact me if you need more info on this topic.
Happy home buying!