In the state of Texas, the standard residential real estate contract provided by the Texas Association of Realtors allows the buyer the right to a termination option period.

Paragraph 23 of the contract states:

For nominal consideration, the receipt of which is hereby acknowledged by Seller, and Buyer’s agreement to pay Seller $______ (typically a couple hundred bucks) within 2 days after the effective date of this contract, Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within _______ days after the effective date of this contract (Option Period).  If no dollar amount is stated as Option Fee or if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be part of this contract and Buyer shall not have the unrestricted right to terminate this contract.

So as you can see, as long as the contract is written to include this provision (and it always will be if you work with me) and as long as the Buyer works within the parameters stated, the Buyer can terminate the contract for any reason.  The option period begins the day after both parties sign and execute the contract and lasts for the amount of days specified in paragraph 23.

The option fee pledged in paragraph 23 is non-refundable in the event that the buyer does not follow through with the purchase.  If the buyer does close on the property, the option fee will be credited back to the buyer at closing.

The option period is often referred to as a “contingency based on property inspection” because the buyer will typically hire an inspector to assess the property during this time period.  However, the results of the inspection do not have to be the reason that the buyer terminates the contract.  In fact, no true reason has to be given.  The option period serves as a secondary evaluation period for the buyer to feel comfortable moving forward with the purchase.

The option period can be extended (usually with additional monetary consideration) with the written consent of both buyer and seller.  Additional repairs an/or credits can be negotiated inside of the option period based on results of various inspections or property evaluations.

While still operating inside the terms of the Option period, the buyer’s earnest money is not yet binding to the contract.  The earnest money is still deposited in escrow with the title company but in its simplest terms, the deposit does not become binding until all contingencies have been removed.