Once your real estate offer in Austin TX has been accepted, have you just purchased a home? If you are a seller, and have just accepted a real estate offer, have you just sold your home? The answer to both questions is, not necessarily.
Let me explain. Buying real estate in Texas is a two step process. Let’s look at how this works.
Most offers include an Option Period. That is a period of time during which the buyer has the unrestricted right to cancel the deal and walk away. The buyer usually pays very little for this right. It only takes a $100 to $300 option fee in most instances to tie up a property for 7 to 15 days. (Don’t confuse the option fee with earnest money; they are two different things.)
So, when a real estate offer has been accepted and signed by all parties, what has sold first and foremost is the right to control the property. The seller has sold control of her property to a prospective buyer for the amount of the option fee. The buyer has said, in effect, “I’m pretty sure I want to buy your home for this price, but if I change my mind and walk away, you can keep the option fee.”
The buyer may decide to forfeit the option fee and walk away for any reason whatsoever during the option period. Most commonly however, buyers have the home inspected, then use the inspection findings to renegotiate the sales price or ask for repair concessions. Sellers will usually (but not always) consider this second round of negotiations because they fear if they don’t the buyer will exercise the option and cancel the deal.
So, I always tell sellers not to get too excited about an accepted offer, because we still have to make it through the option period. And I tell buyers not to be over-cautious or drag their feet making an offer on a property they like, because they always have the option period during which they can resolve any lingering doubts or get out of the deal should the house turn out to have too many problems.
All things considered, I like the concept of an Option Period. In the old days, sellers were left with nothing when buyers backed out of deals, as there are very few circumstances under which a seller can retain the earnest money when a deal fails to close. The option fee solves that problem at least somewhat, and prevents buyers from having “a free look” at properties just by submitting an offer.
So, buyers, the next time you have a real estate offer accepted in Texas, don’t tell your friends “I just bought a house”, tell them “I just bought the option to buy a house. Sellers, when you sign an offer, don’t say you sold your home, say “I just sold someone the option to purchase my house”.
Ok, ok. Go ahead and tell your friends you’ve bought or sold a house! And go ahead and be excited when a deal is reached. Just make sure you understand these two main stages of the deal and how the real estate transaction actually works in Texas.