A Look Behind The Scenes
During Option
What is Option period?
An option period in real estate is a period of time, after a buyer has made an offer on a home and the offer has been accepted by the seller, during which the buyer has the exclusive right to purchase the home at the agreed-upon price and terms.
During the option period, the buyer can typically conduct inspections of the home, including a home inspection, appraisal, and any other inspections that they deem necessary. The buyer may also use the option period to obtain financing or to review the purchase contract with their attorney.
If the buyer finds any problems with the home during the option period, they have the right to terminate the contract and receive their earnest money deposit back. If the buyer is unable to obtain financing or if they are not satisfied with the purchase contract for any reason, they also have the right to terminate the contract and receive their earnest money deposit back.
The length of the option period is typically negotiated between the buyer and seller. In some markets, option periods are typically 7-10 days long. In other markets, option periods can be longer or shorter, depending on the specific circumstances of the sale.
Once the option period expires, the buyer is either obligated to purchase the home or they must terminate the contract and forfeit their earnest money deposit.
Here are some of the benefits of having an option period:
- It gives the buyer time to conduct due diligence on the home and to make sure that it is right for them.
- It gives the buyer time to obtain financing.
- It gives the buyer time to review the purchase contract with their attorney.
- It protects the buyer’s earnest money deposit in case they find any problems with the home or if they are unable to obtain financing.
If you are considering buying a home, it is important to negotiate an option period into the purchase contract. This will give you the time and flexibility you need to make sure that you are making the right decision.
What type of inspections do I need to get done during option period?
Here are the most common inspections that are done during the option period:
Home inspection: A home inspection is a visual inspection of the home and its components, such as the foundation, roof, electrical system, plumbing system, and HVAC system. The purpose of a home inspection is to identify any potential problems with the home before the sale is finalized.
Appraisal: An appraisal is an estimate of the value of the home. The appraisal is typically ordered by the lender to ensure that the loan amount does not exceed the value of the home.
Termite inspection: A termite inspection is an inspection for termites and other wood-destroying pests. Termite inspections are typically required by lenders in areas where termites are a problem.
Radon inspection: A radon inspection is an inspection for radon, a radioactive gas that can cause cancer. Radon inspections are typically recommended in areas where radon levels are known to be high.
Septic inspection: A septic inspection is an inspection of the septic system, which is a system that treats and disposes of wastewater from homes that are not connected to a municipal sewer system. Septic inspections are typically required by lenders in areas where septic systems are common.
In addition to these common inspections, buyers may also choose to have other inspections done, such as a lead inspection, a mold inspection, or a swimming pool inspection. The type and number of inspections that are done will vary depending on the specific circumstances of the sale.
It is important to note that not all inspections are required. However, it is generally in the buyer’s best interest to have as many inspections done as possible during the option period. This will help the buyer to identify any potential problems with the home before the sale is finalized and to make an informed decision about whether or not to purchase the home.
Can the buyers change their mind about the repairs on the home, during the option period?
Yes, buyers can change their mind about the repairs on the home even after they have had an inspection. The option period is a time for buyers to conduct due diligence on the home and to make sure that it is right for them. This includes having the home inspected and identifying any potential problems. If the buyer finds any problems with the home, they can request that the seller make repairs. The seller can either agree to make the repairs, negotiate with the buyer, or refuse to make the repairs.
If the seller refuses to make the repairs or if the buyer is not satisfied with the seller’s offer to make repairs, the buyer can terminate the contract and receive their earnest money deposit back.
This is true even if the buyer has already waived their inspection contingency. A waiver of inspection contingency means that the buyer is giving up their right to terminate the contract based on the findings of the inspection. However, it does not mean that the buyer is giving up their right to request repairs from the seller.
If the buyer changes their mind about the repairs after the inspection, they should communicate their concerns to the seller as soon as possible. They should also be prepared to negotiate with the seller. The seller may be willing to make some repairs, but they may not be willing to make all of the repairs that the buyer is requesting. If the buyer is not satisfied with the seller’s response, they can terminate the contract and receive their earnest money deposit back.
It is important to note that the buyer should be reasonable and realistic in their requests for repairs. If they are asking the seller to make major repairs, the seller may be more likely to refuse to make the repairs or to terminate the contract.
If the buyer is not sure what to do, they should consult with a real estate attorney. A real estate attorney can advise them on their rights and options.
