Option Period: What It Is and How It Affects Buying and Selling Texas Homes

March 5, 2020
January 24, 2022
What is an Option Period?

An Option Period is written into a real estate contract to give a buyer a specified number of days in which they can terminate the contract and be refunded their earnest money deposit. It is intended to give the buyer time to learn more about the home through independent inspections and appraisals, to negotiate repairs and other items in the contract, and to get approved for financing if they are applying for a mortgage. The buyer pays a non-refundable fee to the seller, called an Option Fee, which is the charge for this review period and it typically ranges from $100-200.

According to HAR.com the Texas Real Estate Option Period typically lasts from 1 to 10 days. It begins the day after the purchase contract is signed and ends at 5 PM local time on the specified end date. During the Option Period, the property is labeled as “option pending” (OP) on the MLS. If the buyer needs more time, they can potentially negotiate with the seller to extend the Option Period for additional days.

The Option Period in Texas allows the buyer to terminate the contract for any reason without the risk of losing their earnest money. This is why the Option Period is typically only about a week, although some buyers are granted only a day or two, particularly if the home has several offers on the table or has only been on the market for a short period of time in a hot real estate market.

You can see why the seller wants to reduce the number of days in the Option Period as much as possible while still giving the buyer time for inspections. The longer the home is under OP, the fewer buyers will bother looking at the home because they assume the home will stay under contract.

How Does The Option Period Impact Buying and Selling Texas Homes?

The Option Period can be a stressful time for buyers and sellers. Buyers are pressured to get their inspection scheduled and conducted, then wait for the results, get repair estimates, and negotiate any issues with the seller. The seller must patiently wait for all of this to occur, hoping nothing happens to jeopardize the contract. Anything from a worrisome inspection report to buyer financing troubles and a low appraisal could cause the buyer to back out of the contract during this option period. And there’s reason to worry. According to the National Association of RealtorsⓇ, “issues related to obtaining financing” accounted for 30% of the problems that delay contract settlement, followed by home inspection issues (19%) and appraisal issues (16%).

The Option Period is not a set period of time, but you can make your contract more attractive if you are able to minimize the number of days you ask for in the Option Period. One of the best ways to reduce the length of the Option Period is to remove as many of the reasons why you need an Option Period to begin with. For instance, if you need financing, you can get a pre-approval letter in advance so you have more confidence that you will get approved for a mortgage. Similarly, you can order the inspection and have your lender order the appraisal as early as possible. This ensures you get the results back quickly, within the option period, and have time to negotiate any repair costs or ask for a lower purchase price if the appraisal comes in low.


While a home inspection, report, repair bids and negotiations may take several days to complete and extend the length of the Option Period, home inspections are a good thing for you as a buyer. Rarely, if ever, would you want to bypass a thorough third-party inspection.

As a buyer, it is critical you know what you’re buying, warts and all. If there is a major issue that will require a significant investment to fix, you want to consider that cost before you sign on the dotted line. The home sale price may be within your budget, but when you add in all of the repairs, will that send you over budget? Does the damage or poor condition affect the integrity of the home, such as a cracked foundation, drainage problems, or structural issues? An inspection will reveal anything the seller did not already disclose, as well as verify if the issues they did disclose have been accurately depicted.

Often, the seller is willing to negotiate on the repairs. They may be inclined to pay for some and not others, or to reduce the sales price by the amount of all the expected repair costs. Either way, it would be unwise to take a house as-is without really understanding what you’re getting into. Home inspectors are aware that they must work quickly, yet thoroughly. They know you are within an Option Period and need time to work through their report, but even then, you can expect to wait for 2-3 days just to receive the inspection report and potentially another couple of days to gather repair estimates in order to know the cost of the repairs and whether they are worth negotiating with the sellers.

Financing Approval

Besides the home inspection, the Option Period may need to include time for the mortgage approval process and the bank appraisal. Unfortunately, according to realtor.com, the entire mortgage process, including the pre-approval, home appraisal, and getting the actual loan, can take anywhere from 30 to 60 days. No Option Period in Texas will allow this much time.

One way to minimize this time is to get pre-approved for a mortgage before you even enter into a home sale contract. This way, you already know you are approved and what you are approved for and don’t use up that time in an Option Period. Keep this in mind as we talk about the next issue that can add time to the Option Period: the appraisal.


When you obtain financing from a lender, the bank will require an appraisal of the home before they will lend you the money. Even though you consider the home yours, it is actually the bank’s until you pay back your loan. They don’t want to lend you more money than what the home is worth, thereby necessitating an appraisal.

Like an inspector, the appraiser will assess the home, but they are not concerned with finding damage or wear and tear on the home. Instead, the appraiser is simply looking at the value of the home based on similar homes that have sold in your area. They create a list of comparable homes and then adjust the pricing they think yours will sell for based on multiple factors, like any features you’ve added to the home and the general condition of the home. The appraiser uses this information to determine what they believe is a fair price for the home and provides a report to the bank, typically taking anywhere from 2-7 days.

If the sales price is higher than the appraised value, you may need to put more money down to satisfy the lender’s down payment requirement. If this happens, you will need to either come up with the funds, negotiate with the seller to reduce the sales price, or back out of your contract. If this scenario occurs and your appraisal comes back during your Option Period, then you can back out of your contract without losing your earnest money.

The financing issue is linked to the appraisal issue. If you get a loan to pay for the home, you’ll also have to get the appraisal and you can’t get the appraisal until you’ve put a contract on the home. So, even if you get pre-approved for mortgage financing, you’ll still need to factor in the appraisal time when determining your ideal Option Period length.

Reduce the Length of the Option Period by Buying Home with Cash

But there is a way to remove days from your Option Period: pay in cash. When buying a home in Texas with cash, you don’t need to apply for a loan and wait for the approval. Not having financing means you won’t need an appraisal, either. Basically, your Option Period only needs to be long enough for the inspection report and any resulting negotiations. By reducing the Option Period, you make your contract more competitive than a contingent offer that needs financing, an appraisal, and a longer Option Period.

Buying a home with cash isn’t as difficult as it may sound. Homeward is a company that allows buyers to use their cash to purchase a home after a short approval process. They make an all-cash offer on your behalf, and if it’s accepted you can move in while you sell your existing home. You simply rent your new home from Homeward for up to six months. When your existing home sells, you get a mortgage on your new home and buy the home back from Homeward. If your old home doesn’t sell within six months, Homeward will buy it from you at a pre-agreed price.

With Homeward, you can reduce the days of your Option Period dramatically, buy your next home before you sell your existing home, and save up to 5% on your new home’s purchase price with a cash offer. Not only is your contract more attractive to sellers, but you close faster and dramatically reduce the stress associated with buying and selling a home. It’s a win-win for buyers and sellers.

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