Saturday, March 15, 2008

Why Should I Need an Option as a Buyer?

I am often asked this question by buyers and it amazes me that people don't naturally see the benefit of an option out of a real estate contract. After all, having a few days to "really" make up their mind on a contract is a real power tool to a buyer. Further, the option offers the buyer time to perform the needed due diligence on one of the largest purchases that an average person will ever make.

The option clause was added to our contracts in Texas many years ago simply to put the buyers more at ease. If you are not aware, real estate contracts in Texas do not qualify for the 3 day right of rescission rules that apply to bill of sale and retail purchase agreements. For this reason, the option clause was added to our real estate contracts by the Texas Real Estate Commission (TREC) and the Texas Association of REALTORS® so that buyers had a way out for any reason or for none. This right is purchased with a sum of money and MUST be in the hands of the seller within 48 hours of the execution date on the contract.

I repeat, that this is a HUGE power tool for a buyer in the state of Texas. It offers the buyer time to get the property inspected by a TREC-licensed real estate inspector. During the option period, the buyer has a great amount of leverage with the seller to negotiate needed repairs. This is a great opportunity to get repair costs negotiated and all this prior to closing.

Other buyers (particularly investors) use the option period to make offers on MANY properties at the same time in order get the best deal on one or two of them. This is a common practice (much to the chagrin of sellers), but is another method for controlling the buying process. In this case, the buyer may end up incurring a few dollars in option fees on those the contracts that they opt out of, but they can keep the best deal or deals they were able to negotiate. Many of the investors that work with The HBH Group use this method with great results.

If you have further questions about the option process or any subject that we can help you with, please call our offices at (512) 438-3772 or check out our website at where you can get more information on buying and selling or leasing and managing real estate.

No comments: