Option Period in Texas 🏡: How the Real Estate Option Fee 💰 Could Save You Thousands 💵

* Updated 2-20-2025

Howdy real estate investors! Here is a TX real estate insider trick of the trade. Use the option period in Texas and strategic use of option fees to protect yourself when either home buying or home selling.

Let us explain. The option period can play a significant role in bringing peace of mind to home buyers regarding the condition of the property during the home purchase process.

It provides buyers with the agreed-upon number of days to conduct due diligence, including reviewing the inspection report to assess potential repairs before committing to the purchase. If significant issues arise, buyers can exercise their termination option and back out of the contract without risking their earnest money deposit.

In this guide, we will delve deeper into the nuances of the option period and how to use option fees properly.

Option Period Meaning 

The Texas real estate contract outlines a specified period in which potential buyers and sellers agree upon before finalizing a home sale.

During this due diligence period, the buyer can access the property with licensed inspectors to assess necessary repairs and has the right to terminate the contract if previously undiscovered potential issues arise.

The potential buyers along with their real estate agent perform their own buying process due diligence like obtaining home appraisals, understanding the local housing market and conducting thorough property inspections (like condition of the roof, HVAC, sewer lines). 

The true meaning and design of the option fee is simply to get to know the house and determine the best interest of making a fair offer. The length of the option period and option fees vary but are spelled out in the purchase contract period within the Texas real estate contract called the Texas One to Four Family Residential Contract.

The property is considered “under contract,” and the earnest money deposit is typically held in an escrow account at a title company. The non-refundable fee is usually a small amount but gives the buyer the ability to back out before the end of the option period.

For first-time homebuyers, utilizing the Texas real estate option period and performing due diligence instead of just a hope and a prayer to save them from making expensive rookie mistakes.

For example, our team has found major issues in houses for sale with undisclosed fire damage in the attic, leaking roof, mold damage (does the house smell like mildew?), and foundation cracks, all of which significantly impact the home worth. 

How Long Is Option Period In Texas?

With the option fee amount paid, a buyer in Texas has the opportunity to conduct an inspection period starting on the effective date of the contract, which usually lasts between one and ten calendar days. However, the timeframe is negotiable based on the real estate market and the type of new home.

In a “hot market”, traditional homebuyers often face increased competition, leading many to shorter period of time for their option fee duration. Sellers in highly desirable areas like Dallas-Fort Worth may favor fast offers with shorter option periods, often between one to three days, or in some cases, no option period at all.

This aggressive approach allows cash buyers to stand out among multiple offers, especially in markets with low inventory and high demand like Plano TX in Collin County.

During periods of rapid price appreciation, buyers may also waive contingencies, including home inspections, to make their offers more appealing. While this can help secure a deal faster, it carries risks, as the buyer forfeits the ability to negotiate repairs or back out if significant issues are discovered later.

Cash buyers, particularly investment property buyers, frequently employ this strategy to streamline contract negotiations and close quickly. Sellers benefit from fewer delays, reducing the likelihood of a deal falling through. However, buyers must weigh the potential downsides, including unforeseen property inspections that may uncover costly defects.

By waiving contingencies and offering all-cash deals, buyers could expedite contract negotiations and closing. Many listing agents advised sellers to favor these streamlined offers, as they minimized delays and risks.

How Much Should Option Fee Be In Texas?

The option fee amount typically ranges from $10 to $300 in Texas.

This non-refundable option fee is paid to the seller to secure the option period.

Buyers can use this time to conduct home appraisals, arrange secure financing, and evaluate the property’s condition before the last day of the time period.

Option Fee Refundable in Texas?

The contractual fee from a buyer is a non-refundable option fee at the end of the option period.

The potential buyer purchased the right to have an unrestricted right to terminate the contract for a period of time as detailed in the purchase sales agreement.

How is Option Period Calculated?

The length of option periods in real estate transactions in the state of Texas is usually between one and ten days, depending on the parties involved. The purchase price sales agreement (usually a standard TREC contract) specifies the agreed upon duration to terminate the contract.

The buyer has the specified duration to inspect and appraise the property’s condition after the option period starts. An easy way to determine the option fee timeframe is to use the number of days that both parties have agreed upon in the contract as described by the Texas Real Estate Commission (TREC).

Do Weekends Count In The Option Period?

Unless otherwise stated in the purchase price contract, weekends and any legal holiday are usually considered part of the option period in Texas, and not just business days. Once the real estate contract goes into effect, the number of calendar days that make up the option period begins counting down. This includes all days of the weekend and holidays. Buyers need to read the fine print of their contracts to find out things like the option period’s definition and any holiday or weekend exclusions.

What Happens to Option Fee At Closing?

It is common practice in the state of Texas to apply the buyers option fee amount against the purchase sales price when the deal closes. That sum represents a component of the buyer’s option money that went into the deal. If the buyer decides not to go through with the purchase while the option is still active, the option fee is a non refundable fee paid.

Example of Option Period in Fort Worth Texas

Here is an example from our own experience with option fees..  We have over 40 years of cumulative experience and performed over 2,800 renovations, turns, and property acquisitions throughout Texas and Florida, so we can offer some insider tips on how to buy and sell real estate in Texas.

Specific to how best to use an option period to buy properties in Dallas Fort Worth area, we can recall just last month, when we represented an interested BRRRR real estate investor real estate investor at a Fort Worth TX property.

The investor goes under contract to buy the house in June 2024 and negotiated a 10 day option period starting on June 15^th, 2024 to exercise their option to purchase the property. The non refundable fee paid in this example is $200 to the homeowner as an option fee for the agreed upon period. The buyer has until June 25th at 5pm (last day) to perform their due diligence with their professional home inspector.

During that window of time, our team was asked to do a walk-through and give an overall assessment of value and cost to repair and renovate so the investor could secure financing and make projections for rental cash flow.

However, the buyer did not see the heavy water damage behind the walls and possible foundation repairs needed. This added an additional $33,000 to $40,000 to their baseline financial projects and now made the house not the right property to buy or at least without significant repair negotiations and a seller credit on closing costs. 

Fortunately, with the option period still in effect, the buyer was able to terminate the contract.  The homeowner kept the $200 option fee and house was back on market listed for sale.

This real estate deal in Fort Worth serves to demonstrate the chronology and practical implementation of an option period, but also how important and power of a real estate investor tool to save money and find profitable properties.

What Time Does Option Period End in Texas?

On the agreed-upon date in the purchase price contract, the option period usually ends at 5:00 p.m. local time in the state of Texas. The buyer has the opportunity to complete all necessary inspections and assessments by the agreed-upon deadline before deciding to move forward with the property purchase.

Difference Between Earnest Money vs Option Money

Earnest money is a act of good faith between buyer and sellers when negotiating a purchase contract for sale of a property. The deposit put down demonstrates the buyer is serious about the purchase contract. This money is held in escrow and applied to the purchase price of the home. Option money is more towards the negotiating stage of a real estate transaction. It is an additional fee paid to the seller in exchange for the right to terminate the contract unilaterally during a specific window of time. Option fees are a way for buyers to gain some flexibility as they perform their due diligence process.

Do You Need to Pay Option Money to Have an Option Period?

It is not required by law in the state of Texas to pay option money fee in order to set up option periods. A genuine consideration, even a small sum or a mere pledge to buy, can be enough to establish an enforceable option fee expiration, according to extensive case law. In most cases, though, buyers will pay the seller a fee in order to secure the option period, which shows that they are serious about the purchase.

Can A Buyer Back Out After Option Period in Texas?

Upon until the option period time ends (usually by 5pm), homebuyers still have the right to cancel and terminate the contract. There is a catch, though: when the buyer backs out, they will lose the option fee paid for the right to terminate the contract.

The transaction will proceed once the option period ends, and if the buyer fails to hold their side of the agreement without a good cause, they can lose their money unless there are clauses in the contract that permit the right to terminate and an additional option fee.

What Happens to Option Fee At Closing in Texas?

In Texas, the buyer may receive a seller’s credit for the option fee amount at closing, which offsets the purchase price. However, if the buyer backs out after the end of the option period, the seller’s agent ensures the option money is forfeited as compensation for the lost marketing time.

How Do I Terminate My Option Period in Texas?

It is the buyer’s responsibility to provide written notice to the seller’s agent to terminate the contract prior to the agreed-upon deadline in order to cancel an option period in the state of Texas. In this written notice invoking their right to terminate the contract, the buyer should make it clear that they want to end the contract while the option period is still active.

Need Help Understanding Your Texas Real Estate Contract?

Bright Bid Homes specializes in home search, home buying, and home selling across Texas. Whether you need guidance on new construction homes, investment property purchases, or contract terms, we are here to help.

Our mission is to create an easier way in real estate, helping buyers and sellers make well-informed decisions at every stage.

Let us help you turn real estate into a bright opportunity! Call us to discuss option fees in Texas

** Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial, real estate, or legal advice. While we strive for accuracy, Texas real estate transactions, including the home buying process, option periods, and contingency periods, involve legal complexities that may vary by contract and jurisdiction. Readers should consult a qualified real estate attorney, financial advisor, or licensed real estate professional before making decisions regarding option fees, termination rights, property tax implications, or any aspect of a real estate transaction. Bright Bid Homes makes no representations or warranties regarding the completeness or applicability of the information provided. By relying on this content, you acknowledge that any decisions made are at your own risk.

*** About the Authors: Hilary Schultz is a licensed agent in Texas which is verifiable at verifiable at TREC, member of the National Association of Realtors (NAR), professional real estate investor, and recognized authority on the DFW metroplex real estate market. Recently named a named as Zillow Top Agent for her exceptional service and expertise, Hilary takes pride in helping homeowners solve their real estate problems. She serves on the executive board of her PTA locally and is deeply involved in the DFW community.

Together with her husband, Patrick, Hilary brings over 40 years of combined experience and a proven track record of completing more than 2,800 real estate transactions. Their approach emphasizes providing DFW homeowners with valuable insights, honest guidance, and a truly personalized experience.Discover why so many Texas homeowners trust Hilary and her team — check out our online reviews and learn how we can help you succeed in your real estate journey.