Real Estate Contract - Option Period

Option Period

• The option period is usually about 10 days, but may be longer or shorter, depending upon the circumstances.
• During the option period, the buyer may terminate the contract and receive a refund of his earnest money.
• The seller, however, is obligated to close under the terms of the contract.
• During the option period, buyers usually get inspections and address any other concerns they may have.
• The option period protects you, the seller, because it allows time for the buyer to thoroughly investigate and inspect the property.
• Keep in mind that Buyers must invest time and money on inspections and loan processing.
• When the option period has passed, the buyer will become fully bound by the terms contract.

Option Fee

• The buyer must pay you a nominal fee ($100 is fairly typical) for the right to have an option.
• If the buyer declines the property during the option period he forfeits the option fee.

Buyer's Inspections

• In nearly every case, buyers hire licensed inspectors to inspect the home they are buying.
• After inspections, they usually submit a list of repair requests based on their findings. Essentially, this is a re-negotiation and fine tuning of the contract.
• As a seller, you should be prepared for some repair requests during the buyer's option period.
• You are not obligated to agree to make repairs. However, the buyer may terminate the contract if repair issues cannot be resolved.

Should you inspect prior to marketing your home?

• Sellers sometimes ask if they should have an inspection done on their house prior to marketing. We endorse this completely.
• You will be able to make repairs early, and buyers will have a more comfortable feeling about your property.
• Your inspection report should be attached to your Seller's Disclosure, with notes about any repairs that you have done.
• More than likely, the buyer will still get his own inspection done.
• We have compiled a list of items that often come up on inspection reports.
  

What happens if you receive an inspection from a buyer, and the contract is terminated?

• If you receive oral information from the buyer regarding the inspection report, you should disclose this information.
• Once you or your agent discusses the contents of an inspection report, you have a duty to disclose that information to future buyers - either orally, in writing or by attaching a copy of their report.
• To clearly understand the scope of the report, it is best to ask for a copy.
• The best way to disclose the information to a subsequent purchaser is to attach the report to your disclosure.
• This eliminates the possibility that the information is mis-communicated, and it also documents your disclosure.
• If you believe that the report is in error, you may get a second opinion, and attach it also.
• If you have made some of the repairs noted on the report, attach invoices or notes.

Home Service Contracts

• Home service policies are frequently offered by sellers.
• Sometimes called "home warranties", these policies have helped to reduce the number of disputes after the sale, and protect the interests of both buyer and seller.
• The home service policy covers the cost of certain repairs to systems and appliances during the buyer's first year of ownership.
• The cost of the policy is about $300-500, depending on the items covered in the policy.
• The policy may be paid by the buyer or seller.