What Is the Option Period in Texas? A San Antonio Buyer's Guide to the Option Fee

If you're buying a home in San Antonio, the option period is one of the most important parts of your contract, and one of the most misunderstood. It's the window when you can inspect the home, get repair estimates and decide whether you still want to move forward.

I'm Chris Dudley, a San Antonio REALTOR® (TREC #731381) and founder of Legacy Realty Group, brokered by Real Broker, LLC. Here's how the option period works under the Texas Real Estate Commission's resale contract, in plain language.

What the option period is

Most Texas resale homes are bought on TREC's One to Four Family Residential Contract (Resale), form 20-19. Paragraph 5B of that contract gives the buyer "the unrestricted right to terminate" the contract by giving the seller notice within the number of days written in the blank. That number of days is the option period, and you and the seller agree on it when you make your offer.

"Unrestricted" means you don't need a reason. If the inspection turns up something you don't like, or you simply change your mind, you can end the contract during this window.

The option fee

In exchange for that right, you pay the seller an option fee. Under Paragraph 5A of the TREC 20-19 contract:

• You deliver the option fee (and your earnest money) to the escrow agent, usually the title company, within 3 days after the Effective Date. They can be paid separately or together.
• If that last day falls on a Saturday, Sunday or legal holiday, the deadline moves to the end of the next day that isn't.
• If you close, the option fee is credited to the sales price.

Paragraph 5D is the one to watch: if no option fee amount is written in, or you deliver it late, you do not get the unrestricted right to terminate. Paragraph 5E adds that time is of the essence and strict compliance with these deadlines is required.

How the days are counted

Texas REALTORS® explains that because the contract says "within" a number of days after the Effective Date, day one is the day after the Effective Date. Their example: with an Effective Date of January 22 and a 10-day option period, the option period ends on February 1 (Texas REALTORS® time calculation FAQ).

Notice of termination must be given by 5:00 p.m., local time where the property is located, on the last day. Weekends count, so don't wait until the final afternoon.

What happens if you terminate

If you give notice of termination on time, the contract says the seller keeps the option fee and your earnest money is refunded to you. Miss the deadline, and you lose that unrestricted right, so your earnest money could be at risk if you back out later for a reason the contract doesn't cover.

How I use the option period with buyers

With my buyers across San Antonio, from Alamo Ranch to Stone Oak to Cibolo, I schedule the inspection as soon as the contract is signed, so there's time left to get contractor quotes and negotiate repairs or a price adjustment before the deadline. I also put the exact last day and the 5 p.m. cutoff on the calendar the day we go under contract.

New construction works differently: builders often use their own contracts, so read the termination terms closely or ask me to review them with you.

If you're getting ready to buy anywhere in greater San Antonio, contact me and I'll walk you through every deadline in your contract.

This post is general information, not legal advice. Your contract's terms control; consult a Texas real estate attorney for legal questions.

Chris Dudley, San Antonio REALTOR®, TREC #731381. Legacy Realty Group, brokered by Real Broker, LLC. 8626 Tesoro Dr, Suite 208, San Antonio, TX 78217. (210) 838-6099.