Option Period

What is the Option Period?

An option period is a period of time, typically 7-10 days, during which the buyer has the right to terminate the purchase agreement for any reason and get their earnest money deposit back. The option period is typically included in the purchase agreement, and it is typically paid for by the buyer.

The option period is a valuable tool for buyers, as it gives them time to conduct due diligence on the property by having inspections completed and make sure that it is the right property for them. It also helps give them time to get financing in place and to make sure that they can afford the property.

The option period is sometimes referred to as the inspection period.

If the buyer decides to terminate the purchase agreement during the option period, they must give written notice to the seller. The seller is then required to return the buyer's earnest money deposit in full.

Here are some of the benefits of having an option period in a residential real estate transaction:

  • It gives the buyer time to conduct due diligence on the property by getting inspections completed.
  • Can help give the buyer some extra time to get financing in place.
  • It gives the buyer peace of mind knowing that they can terminate the purchase agreement for any reason during the option period.

If you are buying a home, it is important to understand the option period and how it can benefit you. An option period can give you the time and peace of mind you need to make a sound decision about buying a home.

Here are some of the drawbacks of having an option period in a residential real estate transaction:

  • It can extend the closing process.
  • It is an expense for the buyer.
  • It can give the buyer an incentive to delay the closing process.

If you are selling a home, it is important to understand the option period and how it can affect you. An option period can extend the closing process and make it more difficult to sell your home.

Average Cost of an Option Period

The average cost for an option period in a residential real estate transaction is between $100 and $500. The specific cost will vary depending on the location, the price of the property, and the terms of the purchase agreement.

The option fee is typically paid by the buyer and is non-refundable, even if the buyer terminates the purchase agreement during the option period. The option fee is typically used to cover the seller's costs of keeping the property off the market during the option period.

The option period can be extended, but the buyer will typically have to pay an additional option fee. The amount of the additional option fee will be negotiated between the buyer and seller.

Here are some factors that can affect the cost of an option period:

  • The price of the property: The more expensive the property, the higher the option fee is likely to be.
  • The location: The cost of an option period can vary depending on the location of the property. In a hot market, the option fee is likely to be higher than in a slow market.
  • The terms of the purchase agreement: The terms of the purchase agreement can also affect the cost of the option period. For example, if the option period is longer, the option fee is likely to be higher.

If you are considering an option period, it is important to understand the cost and the terms involved. You should also talk to your real estate agent to get their advice on whether an option period is right for you.