Purchasing San Antonio TX Real Estate FAQ #1 - What is an Option Period
When you are purchasing a home in San Antonio TX, buyers and sellers alike have very similar questions. One of the biggest questions I get as your local San Antonio TX Realtor® is what is an option period?
Both buyers and sellers can have misunderstandings on just what the option period means in the contract. The plain definition of what is an option period is this...
it is a period of time that the buyer pays the seller to have the unrestricted right to terminate the contract for any reason.
When you enter into a Real Estate Contract to buy a San Antonio TX home, and both parties have accepted all that is in the contract, it is binding, meaning that legally, each party must adhere to the contents of that contract. The option period gives the buyer an "out" so-to-speak for a certain amount of time. The buyer pays consideration (a dollar amount) negotiated in the contract to the seller. If the buyer chooses to exercise their option (terminate the contract), they are entitled to their earnest money back and the seller will keep the money. Should the buyer not exercise their option, the money could be credited back to the buyer at closing or credited to the seller.
The option period is typically the time that the buyer will get a home inspection done. Generally before the option period ends, repairs are renegotiated in the contract if the home inspection found anything that is of concern for the buyer. If during the home inspection the buyer finds out the home has major damage or some unforeseen circumstance arises, the option period can be some type of protection for the buyer.
Here in San Antonio TX, the option period is typically negotiated and paid for from 7 to 10 days. I have seen it as little as 3 days and as long as 20 days. However, if we remember the definition of an option period, (the unrestricted right to terminate the contract for any reason), the longer the option period, the less desirable for the seller and to some degree, the buyer and below, I give you a couple of reasons why.
Once a San Antonio TX home for sale goes under option, it is listed as AO in the MLS. Now, the home is still able to be shown to other prospective buyers; however, many won't bother looking at the home because it is thought that once a home goes under contract, the next logical step is Pending. So once a home starts displaying AO, it effectively (although not literally) takes it off of the market.
If, the buyer decides to exercise the option, then the seller will go back on the market, displayed as BOM on the MLS. Because the home was just under option, there is now a stigma on the home, regardless if it was just buyer's remorse and there was nothing wrong with the home. Bottom line, the option period is not the most desirable thing for the seller so you may have a hard time asking for a very long option period.
Additionally, if you as a buyer are under too long of an option period, your lender won't order the appraisal and do the rest of the necessary steps to get your loan finalized. Considering that if you have found the perfect San Antonio TX home for sale for you, the option period will give you the buyer the time to get an inspection and negotiate some other repairs. Once the buyer's mind has been eased and everything worked out between buyer and seller, there truly isn't a reason to remain in the option period.
It's time to make that true commitment and get the home into pending status so the next step is a happy buyer and a happy seller!