The Option Period is sometimes a misunderstood part of the contract. It provides the buyer the option to cancel the contract during a certain number of days agreed to in the contract, without any penalty to the buyer. In consideration for this, the buyer does pay a nominal fee (generally in the $100-200 range), which is not refundable if the buyer cancels the contract. During the option period the seller is not required to do anything, although many times it does result in the seller doing, or agreeing to do something, to the property. This first 10 or so days (depending on what is agreed to in the contract) are crucial. Most real estate deals that fail, do so during the option period.
For the buyer, the option period is the exclusive right to walk away from the contract for any reason, whether related to results of an inspection, or any other reason. No specific reason even has to be provided for the cancellation if the buyer chooses not to. The typical option period is 10 days, but can be shorter or longer depending on negotiations between the parties. In a multiple offer situation shortening the offer makes it more attractive to the seller, and may be more attractive than a higher priced offer. After all, who wants to be in a contract for an extended period of time where the other party can walk away at a moment’s notice.
For the seller, the option period does not give the seller the right to terminate the contract. If another buyer comes along and offers more, the seller can not go and opt-out of the current contract, nor can they renegotiate the already executed contract. However, if the seller accepts another offer as a back-up offer, this certainly does strengthen the seller’s negotiating power during the option period. If the inspection comes back with a number of items in need of repair and the buyer is aggressive about asking the seller to fix many items, the seller can agree to all, some or none of the requests, knowing that if this buyer walks away there is the other contract that would then move into the first position. Depending on how strong the back-up offer is certainly plays into how a seller should respond.
A couple other things to highlight related to the option period: 1) An option period can be extended if agreed to by both parties (which generally happens if further inspections are needed to examine something that was brought up in the general home inspection). 2) Not all repairs have to be completed during an option period. Many times, the amendment only requires items to be completed by closing. 3) Not all inspectors have the same turnaround time so picking the right, and scheduling it early during the option period, can make the different between having multiple days of option period left to review the report(s) and negotiate or only one.
At Deveau Realty, John has been around the remodeling of homes since he was a kid, and thus provides our team with a skill set that many other real estate teams lack. We are able to advise our buyers as to what are the keys issues on the inspection report and not get hung up on the miniscule items. Also, we help our sellers to understand the pros and cons in the negotiating aspect of a repair list. The last thing a seller wants to see happen is the buyer cancel the contract during the option period because of reluctance to fix something that costs $500 and then it sits for another month (or more), which cost the seller way more than $500. During this process we help our client to take the emotion out of it and think logically about the best course of action. Having personally dealt with everything from foundation repairs, drywood termites, mold remediation, plumbing, HVAC, electrical and roofing repairs, there isn’t much on a house that we haven’t had exposure in fixing or remodeling. Our clients are our clients for life, so if a question comes up after closing we are always happy to lend our knowledge to their situation.