Option Period, Inspections, and Appraisals in Texas: What Buyers Need to Know

How the option period, inspections, and appraisal fit together

Once you and the seller sign a contract, the clock starts. Most Texas resale purchases use a contract form promulgated by the Texas Real Estate Commission (TREC). In it, the option period, inspections, and the appraisal overlap but serve different purposes.

1. Contract is signedThe last party signs, and the broker fills in the Effective Date. Deadlines are counted from that date.
2. Earnest money and option fee deliveredUnder the standard resale contract, both are due to the escrow agent (usually the title company) within 3 days after the Effective Date.
3. Inspections during the option periodYou schedule inspections, review the report, and decide whether to ask for repairs or end the contract.
4. Option period endsAfter it ends, you can no longer terminate for any reason under that provision. Other contract rights may still apply.
5. Appraisal and loan approvalIf you’re financing, your lender orders an appraisal and finishes underwriting before closing.

Every contract is different. The number of option days, who pays for what, and which addenda apply are all negotiated and written into your agreement.

What is the option period in Texas?

The option period is a set number of days after the Effective Date during which the buyer has an unrestricted right to terminate the contract. You don’t need a reason. In exchange, you pay the seller an option fee. Both the number of days and the fee amount are blanks in the contract, so they’re negotiated with each offer.

How the option fee works

• Delivery: In the standard resale contract, the option fee goes to the escrow agent within 3 days after the Effective Date, along with the earnest money. If that last day falls on a Saturday, Sunday, or legal holiday, the delivery deadline moves to the next business day.
• If you close: The option fee is credited to the sales price at closing.
• If you terminate on time: The seller keeps the option fee, and your earnest money is refunded.
• If the fee isn’t paid on time, or no fee is stated: You don’t get the unrestricted right to terminate.

Don’t miss the deadline

The standard contract says time is of the essence for the option period, and termination notices must be given by 5:00 p.m. (local time where the property is located) on the last day. The weekend-and-holiday extension in the contract applies to delivering the earnest money and option fee. It doesn’t extend the option period itself. Count the days carefully with your agent, and send any notice in writing as the contract requires.

How long should your option period be?

There’s no standard length. A longer period gives you more time for inspections, quotes, and decisions. A shorter period, or a larger option fee, can make your offer more attractive to a seller, especially when several buyers are interested. Before you choose a number, check how quickly inspectors and contractors can get to the property.

Home inspections: what they cover and how to use them

The standard contract lets you have the property inspected by inspectors you choose who are licensed by TREC or otherwise permitted by law, and it requires the seller to keep the utilities on. A general home inspection looks at the visible, accessible condition of major systems and components, such as the roof, structure, foundation, electrical, plumbing, heating and air conditioning, and appliances.

Specialty inspections to consider

Depending on the home, your inspector may recommend a closer look by a specialist. Common examples in Dallas–Fort Worth include:

• Foundation. North Texas has many clay soils that expand and shrink with moisture, so foundation movement is a frequent question.
• Sewer line camera scope. Especially for older homes or those with large trees.
• Roof. Helpful after hailstorms or when the roof is near the end of its life.
• Wood-destroying insects. Sometimes required by the lender.
• Pool and spa. Equipment, surfaces, and safety features.
• HVAC. Systems that work hard through Texas summers.

Reading the report

Inspection reports are long, and nearly every home has findings. Sort them into three groups: safety issues, major or costly items (structure, roof, water intrusion, major systems), and routine maintenance. Focus your decision on the first two. For anything significant, get a quote from a qualified contractor before the option period ends so you can negotiate with real numbers.

Inspections are optional, but strongly recommended, including for new construction and homes sold “as is.” In the standard contract, accepting a property “as is” doesn’t prevent you from inspecting it, negotiating repairs, or terminating during the option period.

Negotiating repairs after the inspection

If the inspection turns up concerns, you have several options during the option period:

• Ask the seller to make specific repairs before closing.
• Ask for a price reduction or a credit toward your closing costs, subject to what your lender allows.
• Accept the property as is and plan the work yourself.
• Terminate by giving written notice before the deadline.

Any agreement must be in writing, usually through an amendment to the contract. If the seller agrees to repairs, the standard contract requires them to be completed before closing by licensed professionals (or by people commercially engaged in that trade if no license is required), with documentation of the work and transfer of any transferable warranties.

Keep the timing in mind. A repair negotiation doesn’t pause the option period. If you can’t reach agreement in time, you’ll need to decide whether to terminate before the deadline or move forward.

Lender-required repairs

Sometimes the lender requires repairs, often based on the appraisal. Under the standard contract, neither party is obligated to pay for lender-required repairs unless agreed in writing. If nobody agrees to pay, the contract terminates and your earnest money is refunded. If those repairs cost more than 5% of the sales price, you may terminate and get your earnest money back.

The appraisal: what happens if it comes in low?

If you’re financing, your lender orders an appraisal from a licensed or certified appraiser to estimate the home’s market value. The lender uses it to decide how much it will lend. The appraisal fee is typically the buyer’s expense. The appraisal usually happens after the option period, so plan for it.

If the appraisal comes in below the contract price, common next steps include:

• Renegotiating the price with the seller.
• Covering the difference with additional cash, if you’re able to.
• Asking your lender about a reconsideration of value if you believe relevant sales were missed.
• Terminating, but only if your contract gives you that right.

Your right to terminate over the appraisal depends on the paperwork. TREC’s Third Party Financing Addendum lets a buyer terminate if the lender determines the property doesn’t meet its underwriting requirements (including appraisal), subject to the addendum’s notice and timing rules. TREC also has a separate Addendum Concerning Right to Terminate Due to Lender’s Appraisal, which can either waive or limit that right. Make sure you understand which apply before you sign.

Option period vs. inspection vs. appraisal

Buyer checklist

For your own planning. Checking items doesn’t send anything to Clever Realtors.

• Confirm the Effective Date and count the option days on a calendar
• Deliver earnest money and the option fee within 3 days
• Book a TREC-licensed inspector right away
• Schedule specialty inspections if recommended
• Get contractor quotes for major findings
• Decide: request repairs, a credit, accept, or terminate
• Put any agreement in a written amendment before the deadline
• Stay in touch with your lender about the appraisal