Keeping Everyone’s Options Open. . .What is an Option Period?

Keeping everyone’s options open

Did you know there’s an “undo” button for buyers in a real estate contract? Well, it’s not really a button, but there is a clause in sales contracts that allows buyers to cancel the whole deal, legally undoing the real estate contract. Paragraph 23 in the Texas Real Estate Commission residential sales contracts, the “termination option,” lets buyers pay a fee for the right to terminate their contract during a defined period of time.

The termination option isn’t a required element of a contract to purchase a home. However, most buyers make it part of their offer. The amount of the fee and the number of days of the option are negotiable. Whether you’re a buyer or seller, your Texas Realtor® can help you decide what is reasonable and necessary given the circumstances of your situation.

What’s it for?
During the option period, a buyer may terminate the contract for any reason and get his earnest money back. Most buyers use the option period to have a home inspection and otherwise evaluate the condition of the property. However, it doesn’t matter what the buyer’s reasons are for terminating the contract, as long as he gives notice of termination within the time specified in the contract. If the buyer doesn’t terminate the contract during the option period, the transaction moves ahead and the option fee is either credited to the sales price at closing or not, as negotiated in the original contract.

Why would a seller agree to it?
Sellers don’t have the ability to terminate the contract during the option period, but the termination option does provide benefits to the seller. First, sellers receive a fee in exchange for the buyer receiving his right to terminate. For example, if you agreed to a $200 option fee and the buyer decides to terminate his contract to your house, you keep the $200.

Second, the option period gives buyers time to perform due diligence and enter into the contract happy with their purchase. How does this benefit sellers? It’s better to sell your home to someone satisfied with the condition of the property rather than a buyer who’s bitterly disappointed that he ever agreed to buy your home. The truth is that if the buyer terminates the contract during the option period, you most likely got out of a transaction that would have caused you headaches and possibly a trip to the courtroom.

Buyers should …
As a buyer, make sure the option fee is an amount you are comfortable paying should you decide to terminate the contract. And don’t schedule inspections on the last day of the option period. You want to allow enough time to conduct inspections of the house and address any concerns you have about the property. Keep in mind you may need follow-up inspections. Also, if an inspection reveals conditions that lead to additional negotiations between a buyer and seller, a buyer will want those talks to happen during the option period, so he still has the right to terminate.

Sellers should …
While most sellers want to keep the option period as short as possible, negotiating hard for an extremely brief option period may work against you. If a buyer feels pressured and cannot get the information she needs in time, she may feel her best course of action is termination of the contract. Even though there’s an option on the property, sellers can continue to market the house and accept backup offers, giving those sellers a measure of protection in case something does fall through.

For more advice about buying and selling real estate, visit TexasRealEstate,com.

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4 Most Frequent Questions from First-Time Homebuyers Answered

If you’re thinking of buying your first home, you’ve undoubtedly got questions about how to get started and what the process entails. Here are answers to four common first-time homebuyer questions to help you make informed decisions.

1. Is it the right time for me to buy? You might hear conflicting ideas about whether or not it’s the right time to buy. The answer is ultimately up to you, but here are some things you should consider when deciding if buying now is the right move for you:

• Do you have a stable source of income?
• Are you able to make monthly mortgage payments?
• What is your credit situation?
• Are you prepared to cover the additional costs of homeownership, such as regular home maintenance or unexpected repairs?

2. How do I get started? The best place to get homebuying help is from a Texas Realtor®. Texas Realtors® do more than show you properties. They can help you determine how much home you can afford, negotiate the best price for your dream property, and help you navigate the tricky process that comes along with purchasing a home. You can get recommendations for Texas Realtors® from family or friends, or use the Find a Texas Realtor® search on TexasRealEstate.com

3. What’s the difference between all of these mortgage loans? You should ask your Texas Realtor® to explain in more detail various mortgage loans, but here are two of the most common:

• Fixed-rate mortgages. A fixed-rate mortgage keeps the same interest rate over the lifetime of the loan, typically 15 or 30 years. Your monthly payment will stay consistent except for adjustments on taxes or insurance.
• Adjustable-rate mortgages. Adjustable-rate mortgages (ARMs) have interest rates or monthly payments that can fluctuate over time. While ARMs start out with lower monthly payments, they can be riskier in the long run because of their potential changes.

This is a basic overview of just two mortgage loan options, so make sure spend some time talking with your Texas Realtor about options that may work best for your situation.

4. How much should I offer for a house I want? When you find a house you love, it can be confusing—maybe even a little scary—figuring out how much to offer. Come in too low and you may lose the house. But you don’t want to pay more than you have to either. Your Texas Realtor® is the best resource to help you put together a strong offer. She or he will provide information about the local market, the home’s condition, and comparable home sales. Your Texas Realtor® also will help you understand all the factors besides price that go into an offer. Be open to negotiations. You may have to go back and forth with the seller to reach the best price for both of you.

Being a first-time homebuyer is exciting, but it’s easy to get overwhelmed with the details. A Texas Realtor® can provide more information about these common questions, plus answer yours. Visit TexasRealEstate.com to find the best Texas Realtor® for you.

Easy, Inexpensive Ways to Make Buyers Think Your House is Bigger

You can’t change when or where your house was built. And unless you want to spend a lot of money that you’ll never recoup in a sale, now’s not the time to knock down walls or build an addition. But there are ways to make your rooms look bigger, and I recommend that you try some before you put your house on the market.

You don’t have to be a professional home stager to accomplish this trick, and you don’t need a lot of money. There are plenty of decorating tricks that can have buyers feeling like your living room is spacious, not small.

Get rid of clutter
This step is the most basic but can be hard for some sellers. Removing clutter doesn’t mean putting your books and magazines in neat piles—it means getting rid of the books and magazines. Take all your knick knacks and put them in storage. You want tables and shelves with space on them, not clogged with photos and curios. Lose any area rugs and pare down your furniture, too. It’s better to have a few large pieces than several small ones.

Keep traffic patterns clear
Every house has natural paths that people take. Whether it’s from the kitchen to the dining room or from the living room to the bathroom, make sure these walkways are clear. You may not mind having to walk around a large sectional to get from the TV room to the kitchen, but buyers will think your TV room isn’t big enough.

Preserve your views
Related to clear walkways are clear views. Keep tall furniture like bookshelves away from doorways, and pull back the shower curtain to expose the entire bathroom. Don’t block any part of windows, sliding glass doors, or French doors.

Choose your colors wisely
You probably plan to repaint some rooms. Make sure you choose light colors that feel cool, such as light blue or light green. Not only will light colors create a sense of openness, actual light helps, too. Open curtains or blinds to let in sunlight, and consider adding a lamp to dark corners.

Get an objective opinion
When you’re “done” making these changes to your house, ask for feedback. Your Texas Realtor® is a great source for such information—and she likely has other suggestions to make your house seem bigger—but also ask friends or colleagues who don’t often visit your house to give their impressions as if they were buyers.

These are just a few ways you can get buyers talking about the space you have, not the space your home is missing. No amount of interior decoration or home staging will alter your home’s size, but a few of these tips might get buyers double-checking your listed square footage.

For more tips on preparing your home for sale, visit TexasRealEstate.com or talk to a Texas Realtor®.