The process of buying a home in Austin is a bit different than buying a home in other parts of the country. In most states, the purchase contract gives the buyer a free look at the property and allows them to cancel the contract for any reason during a negotiated period of time. If the buyer cancels, they owe no money to a seller. Buyers who come from other states are a little confused by our system and often ask, what is the termination option?
Termination Option Gives Buyer the Right to Cancel
In some respects, the termination option is very similar to the inspection contingencies (or free looks) in other parts of the country. The termination option gives the buyer the right to cancel for any reason during the negotiated period of time (on average, 7-10 days). The difference in Austin is the buyer pays the seller for the right to cancel.
Termination Option Requires Buyer Pay Seller a Fee
The termination option is not automatically given to a buyer in every Austin real estate transaction. For a buyer to have an option to cancel, they must pay the seller a negotiated fee. The option fee may or may not be used towards the buyer’s closing costs, depending on what was negotiated in the contract.
Buyer Must Pay Seller within 3 Days or No Option
If the buyer wants to have the right to their option as was negotiated in the purchase contract, they must pay the seller, or the seller’s agent, within 3 days. If the seller has not received the fee by the third calendar day after the contract was executed, the buyer no longer has a termination option. Time is of the essence for this provision, so if you want an option to cancel, you want to deliver it to the seller by the deadline. I wouldn’t suggest mailing the check.
How Much Does the Termination Option Cost a Buyer?
The option fee is negotiable between buyer and seller and usually is proportional to the purchase price of the house. We’ve seen option fees as little as $50 and as high as several thousand.
What Happens to the Buyer’s Option Fee if they Cancel?
If the buyer cancels during their option period, the seller keeps the buyer’s option fee. The option fee was paid for the right to cancel. If the buyer cancels, they’ve exercised the right they’ve paid for, and the seller keeps their fee.
What Happens to the Buyer’s Option Fee if they Purchase the House?
It depends on what was negotiated in the contract. If the parties agreed the option fee will be credited to sales price at closing, the buyer will get credit for their option payment at closing. If the parties agreed the option fee would not be credited to the sales price at closing, the buyer will not get a credit.
Considering Buying a Home in Austin?
Hire a buyer’s agent who knows the process and can help you navigate it with ease. Our team of buyer’s agents are experienced and have helped many buyers like you over their combined 60+ years of experience find the right house in the right neighborhood. Check out our Austin Home Buyers section to learn more about our team. Then, fill out our Buyer’s Survey, email us at info@11OaksRealty.com or call us at (512) 827-8323 to schedule a no obligation consultation.
This Post is Not Intended to Be Legal Advice. Need Legal Advice? Speak to a Real Estate Attorney
This post is not intended to be legal advice. We are not attorneys, nor can we give legal advice. If you think you need legal advice, contact an Austin real estate attorney.
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