Don R. White Jr.

Real Estate OptionsAn option is a right to do something on specified terms and within a specified time period. Options typically have a set duration, and after that time the option expires and can no longer be exercised.

In Texas, the most common type of real estate contract that most people will enter into is the Texas Real Estate Commission’s One to Four Family Residential Contract (“TREC”). This form is used in the sale and purchase of homes.

The Option clause is an important though often overlooked provision in the TREC.  The Option is within paragraph 23 of the contract and that paragraph is entitled “Termination Option”. This provision allows the Buyer the unrestricted right to terminate the contract for any or no reason, as long as it is terminated within the time provided in the Option, and in the manner so provided.

This is a very powerful tool on the part of the Buyer. If during the inspection process something is discovered that was not disclosed by the Seller, and if there is still time left in the option period, then the Buyer can signal the Seller that he/she plans to terminate the contract unless certain concessions are made. Alternatively, the Buyer can just terminate without asking for concessions. If the Termination Option is properly exercised, the Buyer has no further obligation under the contract. It is this Option that gives the Buyer superior bargaining position AFTER the contract is signed.

Make sure to always have the “Termination Option” properly filled out and take advantage of this important tool!

Options are a powerful tool to be utilized. The Option in the TREC contract is a basic type of option. Options can be developed to take into account almost any conceivable situation. Options can be developed with different exercise prices as time goes forward. They can be very complex and as such, one should consult an experienced Real Estate Attorney when faced with an Option Contract.

Here at Hayes, Berry, White & Vanzant, LP., two of our Partners, Don R. White, Jr. and Richard D. Hayes are Board Certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization. Give us a call and we will be happy to help.