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When you buy a house getting a home inspected is one of the best things you can do. They are on your side, and work for you, identifying all the things that need to be addressed in the home you are thinking of buying. (more…)
The other day, I advised my clients to reject a contract for an unexpected reason, the option fee submitted was too low.
When I get a receive an offer on a house there are a bunch of things that I immediately look at and use to evaluate if it is an offer that I will recommend by clients accepts or reject
- The sales price
- The Financing. Is it a cash offer or will there be a mortgage?
- The Earnest money amount
- When is the closing date
- The Termination option (or the Option Fee, as it is commonly called)
- Who is paying for the title policy
- Who is paying for the survey
- If there is a residential service contract being asked for, and who is paying for it.
Each of these 8 things are totally negotiable, and cost money that comes out of someone’s pocket. And as a seller of a house, you can reject any offer based on any reason. So be sure to carefully evaluate everything and make sure it is to your liking, because once you are under contract it is hard or even impossible to change things.
The buyers have a few more options to get out of a contract than the sellers. But as time goes on, they get more expensive. There are two different points where a buyer can cancel a contract. The first is at the end of the option period, and the second is after that, but involves loosing their earnest money (and possibly more).
As soon as a contract is executed, the clock starts ticking. You are in escrow, and each side has a bunch of things to do, as outlined in the contract, to make sure everything happens by the closing date. You can’t back out, unless…
Unless you use the option period. The option period is a short amount of time at the very beginning of the contract that the buyer can purchase. Option checks can be anywhere from $250 – $1000 or more, and generally last a week. That’s 7 calendar days (not business days). During this time, the buyer can back out of the contract for any reason, and all they loose is their option check.
Since this is a way out of the contract, I like to see a higher option fee, and the other day I advised my clients to reject an offer because the option check was only $50.
I didn’t want my listing to be tied up for a week while they decided to kick the tires of the house. You see, if the house is under contract, you can take backup offers, but the first contract is the one that has to be done first.
Right now Austin is in a deep Seller’s market. There are a lot of people looking to move to Austin, and not a lot of places for them to live. If they are serious about buying a house, they need to back it up.
I’ve been burned before at the last minute by buyers cancelled out at the very last minute because they get cold feet. It is a waste of time for everyone involved. Of course it is their right, but it costs them money. And I believe the higher the option fee, the more serious they are as buyers.