Home Buying in Richardson>Question Details

venkat230278, Home Buyer in Richardson, TX

Option Money: Terminating a contract after reading seller's disclosure

Asked by venkat230278, Richardson, TX Wed Jun 13, 2012

For the purposes of this question, lets assume that Seller's realtor provides all information to my realtor. I liked a home and was told that HOA payment for a year is, say $X. Day 0 I signed the contract. Day 1 I paid the usual $1000 earnest and $100 option money. Day 2 I received the Sellers disclosure which listed that the HOA was 3 times $X. I decided to terminate the contract. I got my earnest money $1000 back, but option money $100 is gone.

My first question is: Sellers realtor refuses to refund option money. Is it possible to get the option money back?

My second question is: This seems to be an easy way to make money. List a home with problems. Prospective buyer pays $100 to keep the option period open. Disclose issues with the home or show a big expense. Buyer walks away and seller keeps the option money. Am I right?

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Bruce Lynn’s answer
Option money is just that. Likely not to be returned. It's not the seller's agent who has it to return, but the seller.

Normally I would want to see the seller's disclosure before you enter into a contract for a normal purchase. Remember foreclosures and some other homes won't have any disclosures in most circumstances.

As to answer question number 2, I don't think anyone is going to get rich collecting option fees. Never seen this happen. To me the option fee is the best part of the whole contract in Texas. For $100 you can tie up a very expensive house with no obligation to buy and the right to walk away for any reason or even NO reason and the seller has no recourse. To me it should be $100 or more a day to tie up a property like that, but $100 to $200 is fairly normal.
0 votes Thank Flag Link Wed Jun 13, 2012
Bruce Lynn, Real Estate Pro in Coppell, TX
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Like most agents explained that the option fee is due to seller when all parties signed the contract and the contract is executed. This is the only way for the buyer's propection that you are a serious buyer and you have the option period to inspect the property. When you are purchasing a 250k property what is a $100.00. In the seller's stand point that wont even cover a day of rental payment. So this is a very basic consideration for the parties in the contract so you will not be entitled for a refund on the option money.

It would be wise to ask for a HOA resell certificate next time when you purchase a condo or town home with a HOA.

Good luck!

Dixon
Realtor
JP and Associate Realtors
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0 votes Thank Flag Link Wed Jun 13, 2012
Your Realtor should be explaining all details when you enter into a sales agreement. Many concerns I handle PRIOR to submitting any sales offer and "toasting buyers" money .

It is based on how sales offer is structured.

Contact my office today where I can show you many amazing homes work with your family specifications.

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0 votes Thank Flag Link Wed Jun 13, 2012
The Option Fee belongs to the Seller once a contract is executed and would be credited back to Buyer at closing (if all parties have agreed to this in the contract). The Option Fee must be receipted (by the Seller or their Agent) within two days of the contract being executed (agreed upon by all parties & dated) Once there is an executed contract, the Buyer is on the hook for the Option Fee plus any Buyer inspection costs.
0 votes Thank Flag Link Wed Jun 13, 2012
First Question = Please read page 8 paragraph 23 of Purchase Offer. If Buyers gives notice of termination within the time prescribed, the Option Fee will not be refunded; however, any Earnest Money will be refunded to the Buyer. ** This is why I make sure I indicate that the sellers disclosure be due by day 2 of the offer (Page4, Section7B). This would have avoided any money being tied up, before Buyer received disclosures. The offer was not typed to up to protect your money. Could have easily been avoided. This was either a rookie mistake or a complacent error on your Realtors behalf.

Second Question = Sellers can't make money off of Options Fees if the Purchase Offers are composed correctly. Contact me if you want a secured offer.

Cheers!
Hunt

--
Hunt Holdridge
HUNTAHOME, LLC
Office: (214) 866-0050
Mobile: (214) 457-1639
Email: hunt@huntahome.com
Web: http://www.HUNTAHOME.com
0 votes Thank Flag Link Wed Jun 13, 2012
Hunt. I read Paragraph 23. It gives me 2 days time to pay $100 from the Date of the Contract. 2 days is fixed and not changeable. Even if I terminate the contract prior to two days for any reason, it appears from the contract that I'd still owe $100 to the seller. I'd be in bigger trouble if I do not pay the $100, since that would put me in default as per the terms of the contract. It seems that the minute all parties have signed the contract, buyer is already in by $100 and the only way to recover that money is through closing.

The only way I see out of this is if I have the seller's disclosure along with the contract, and that way, I would not be signing the contract if I did not like the disclosure.
Flag Wed Jun 13, 2012
Option money is the sellers to keep if you terminate for any reason at all but is credited back to you if you close. It is in response to their removing their property from MLS and therefor basically stopping showings. Small price to pay to get an unrestricted right to terminate a contract.

As to making money, it actually costs a seller to remove their home from the market during an option period. Say a buyer pays $100...which by the way is a very low option fee, for a 7 day option period. The seller is paying 7 days worth of mortgage payments, taxes, insurance, utilties etc while they give the buyer a right to make a decision. If anything, buyers more often abuse this priviledge by putting more than one property under option contract at the same time and then terminating one of them.

Best of luck
0 votes Thank Flag Link Wed Jun 13, 2012
http://www.agentharvest.com/blog/real-estate-industry/how-to…



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0 votes Thank Flag Link Wed Jun 13, 2012
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