3 Questions to Ask Before Signing an Active Option Contract

3 Questions to Ask Before Signing an Active Option Contract

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You have a buyer for your house—congratulations! It’s a great feeling to finally find a buyer and it’s normal to want to move the process along as quickly as possible.

Unfortunately, just because the paperwork has begun, it doesn’t always mean the sale will go through. If you find yourself in an active option contract as a seller, it’s important to understand fully what it means and how/why the buyer may back out of the sale.

1. What Is an Active Option Contract?

There are many things happening, seemingly all at once, when attempting to sell your home. It can be confusing and overwhelming. As a seller, you may find yourself in an active option contract. But what does active option contract mean and should you be concerned?

The Real Estate Glossary at Redfin defines an “active option contract” as an event in which a “seller has accepted an offer to sell a home, but the transaction is in the inspection or the ‘option’ period.”

When a home is in an active option contract, it’s the buyer who initiates the inspection process, usually by a third party such as a certified home inspector. The home stays in active option contract while it’s inspected and under evaluation. During this time, the buyer can opt-out of the contract to purchase the house.

2. How Long is the Active Option Contract Period?

Buyers don’t get to drag out the active option period, which does help the seller. The time period for a buyer’s active option typically is seven to ten days. Some real estate professionals may refer to it as the 10-day period for this reason.

During this time, the burden falls to the buyer who is responsible for hiring and paying for a home inspector and ensuring the inspection is completed during the allotted time. However, the seller does have to deal with the hassle of having their home scrutinized by an inspection plus the worrying and waiting to find out the results.

3. Who Pays the Option Fees?

The potential buyer pays for the inspection as well as the option fees. States like Texas have a specific option fee that’s different from earnest money.

Earnest money is a deposit made by the potential buyer that’s held by the title company when an offer is made on the house. It’s sometimes called “good faith” money. When the buyer completes the transaction at the closing, the earnest money is rolled into their down payment on the house.

The active option contract fee also is paid by the buyer and this money goes to the seller if the buyer backs out of the contract/sale. The fee is delivered to the seller even if the seller’s reason for terminating the contract is covered by a stated contingency.

While the buyer may not get back the option fee, they can get back their earnest money. If the buyer goes through with the purchase, the option fee can be applied to the sale price.

Selling a home can have rocky waters to navigate, especially if your property needs repairs or has other issues. It’s exciting to find an interested buyer and begin the sale process, but sales can and do fall through for various reasons. This is not only frustrating, but it wastes time and money.

It’s important to remember even if you make it through the active option contract period with the buyer still on board, they can opt to negotiate for a lower sale and ask you to fund and/or make repairs to the home as part of the negotiation.

How HomeGo Can Help

If this sounds like too much hassle and heartbreak for you, then consider selling to HomeGo. With HomeGo you experience a guaranteed sale and price that won’t change, plus there is no home inspection. Skip the uncertainties and rely on HomeGo for a transparent, professional home sale.

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