OPTION PERIOD
What does option pending mean?
Chances are if you’ve clicked around websites like HAR or Zillow you’ve noticed some homes will be highlighted and say “pending” or “option pending”. First time home buyers are often unsure what this means and it ends up being one of the first questions I get from new clients so I figured I would outline everything you need to know.
QUICK FACTS
- Number of days negotiated between the buyer and seller when submitting an offer.
- The option period begins as soon as the offer is accepted and the contract is executed.
- Generally the option period is 10 days but can be shorter or longer.
- The buyer will write a check to the seller for the agreed amount, usually $100-$200
- The option fee can be applied towards closing cost if agreed upon.
During the option period the buyer will have the home inspected and negotiate any repairs or a change in the sales price. If both parties are unable to come to an agreement the buyer has the “option” of terminating the contract and having the earnest money released back to them. However, the seller will be entitled to the option fee that was paid.
During the option period, the buyer can walk away for any reason as long as they submit the termination BEFORE 5:00 PM on the last day of the option period.
In the case that the buyer decided to walk away AFTER the option period has ended, the seller would be entitled to the option fee AND the earnest money that was deposited with the title company upon execution of the contract. Usually the earnest money is 1% of the sales price of the home.
Option Fee is roughly $100.
Earnest Money is roughly 1% of the sales price.
In short, you can look at the Option Period as an agreement between buyer and seller, for seller to take their home off the market (for a small fee) in order for the buyer to do their due diligence on a home.
As with most things in real estate, everything is negotiable but if you are a home buyer it is always a good idea to take advantage of the option period. You don’t want to be locked under contract on a home before your inspector has had a chance to take a look around.
Your inspector might find an underlying issue, for example with the A/C, he will then recommend you have a A/C specialist investigate further. Be sure you have enough time for any foreseen inspections. I recommend having a general inspector check the property within the first couple of days of the offer being accepted, this way you will still have plenty of time remaining if a second option for a specialist is needed.
Don’t get your hopes up on a home that’s already “pending”.
I advise my clients to ignore “option pending” or ‘pending” homes when searching. If the buyer of that home decided to terminate, the home will show as “active” again. Therefore there is no reason to keep up with a “pending” home.
If you have any questions relating to a specific real estate transactions or just want to learn more feel free to shoot me an email at kenny@nuvillarealty.com or a text at 281-352-9972.
