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What's the difference between option money and earnest money?
Do you understand the difference between earnest money and option money? My clients in the Austin area often ask me about the difference between option money and earnest money. In Austin, and the rest of Texas, the buyer must provide two checks once under contract for a property. Both must be delivered in a timely fashion, and are usually used in residential transactions in Texas.The option money is non-refundable; however, a good real estate agent, like myself, will make sure the contract specifies that the option money will be applied to the sales price if the buyer determines they want to move forward with the purchase during the option period. The option money is essentially payment to the owner for the right to enter the property and perform any inspections or due diligence necessary within a specified amount of time. This check is made out to the seller, and the seller can cash it immediately. Below is a snapshot from this part of the Texas residential purchase contract.
The amount of option money and the length of the option period are specified in the contract; however, both are negotiable amounts. A good general rule of thumb in the Austin real estate market ... more
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