What is a Termination Option Period? Do I really need one?

What is a Termination Option Period? Do I really need one?

Yes, I would highly recommend that you get one when you buy a home in the state of Texas, unless or course, you are an investor, and it will strengthen your offer to purchase and close on a home quickly.  Buyers have the Option to purchase a Termination Option Period in the contract which gives them a specific amount of days to do their due diligence with inspections, contractors, or anyone else to help them make their final decision on purchasing that pre-owned home.  Naturally, there is a cost to the buyers for obtaining this option. In the state of Texas, this cost varies from city to city.

In San Antonio, that cost can be anywhere from $50 to $500 or even more, depending on the final agreed terms of the offer/contract. Some sellers do not want their homes off the market for more than 5 days while the buyers are having these inspections, etc. Usually, the longer the days off the market increases this cost to the buyers. Asking the buyers to pay as much as $200 or $300 for 10 days is not unusual, but the average first time buyers, who are shopping for homes less than $150,000, will see the costs ranging from $50 to $150.

In addition to having inspections done during this termination option period, buyers may want to visit with the neighbors, collect information about the neighborhood crimes from the police department, investigate websites for sex offenders, or look for signs of any gang activity.  Besides getting a lot of inspection information about the condition of the property, buyers need to be sure if this home meets all of their criteria and expectations for a home in that particular neighborhood.  Your real estate agent will be able to assist you during this termination offer period.

This is also the time to request and negotiate for any repairs from the sellers too. Time is of the essence, and a sharp buyer’s agent will not let their buyer’s Termination Option Period expire before getting an agreement between the parties on any repairs. If the buyer decided to terminate the contact during the option period, then the buyer will lose all monies given to the sellers for this Option Period, but all Earnest Money given to the escrow agent for the contract will be refunded to the buyers. 

If the buyers are happy with everything at the end of the Termination Option Period, then all the monies paid for this Option Period will be credited to the buyers at closing by the escrow agent. These will just be additional funds along with the Earnest Money for the buyers credit. If no money amount is indicated in the contract, then there is not Option Period awarded to the buyers.  I always recommend to my buyers the Termination Option Period in all contacts.