What if I don’t pay the option fee in time?
03/08/2016 | Author: Legal Staff
What happens if I don’t pay the fee for a termination option within three days from the time the contract was accepted? Can I still pay the fee after three days and rely on the option period to terminate the contract?
No. In the Termination Option paragraph, it states: “… if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract.”
Since many buyers purchase a termination option with the intent of conducting inspections and making other considerations while reserving the right to terminate the contract, buyers will want to make sure not to miss the payment deadline in this paragraph.
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If I did not pay the option fee and the contract did not move forward, the seller chose another buyer. Do I own him the option fee? Do I have to write a check to pay him after 2 weeks of contract cancellation.
Many times listing agents tell buying agents to leave the option check at the title company and they will pick it up there. Many title companies will take the check but of course not receipt it as it should be. With so many agents working out of their homes and for brokers in other cities it becomes a huge challenge at times to get the check into the Seller or listing agents hands AND get the receipt page signed. I would love to see the option fee be included with the earnest money and all left with title company as I understand it is done with commercial contracts.
@ Larry I’m dont think TREC is telling anyone something contrary to what they very clearly write into their promulgated contract forms. If the Option Fee is not delivered to the Seller or the Seller’s Broker within the three days and receipted, there is no option period. It (the contract) says so in black & white.
Larry, I do not see your that your comment is valid on the TREC website. The TREC website is very clear just as the paragraph is. TREC website actually states “Q: We are selling our house and the buyer never paid the option fee. What happens now?
A: Typically, the buyer’s agent collects the option fee upon final acceptance of the terms of the contract and delivers the option fee check to the seller’s agent. Paragraph 23 in the 1-4 Family Residential Contract provides “If no dollar amount is stated as the Option Fee or if the Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract.” Under the terms of the 1-4 Family Residential Contract, the buyer (or buyer’s agent) has three days to deliver the option fee. If the fee is not paid and the parties need help interpreting this provision, they will need to consult with a private attorney.”
It does not state that if the Seller cashes the check during the what should have been the Option Period is now the Option Period. I would disagree with you on your assessment. However, if you have a different link from TREC stating what you are stating, please provide the link.
Dena, you are absolutely right that it is “Frightening how many agents don’t know this…. and don’t actually READ the promulgated forms. ” It is amazing how many agents do not know the contracts, nor do they know how to even complete the forms properly & it’s more amazing how some agents even have a license or that their Broker could care less which is what my office is experiencing right now.
If the seller cashes the option fee check no matter when it was delivered the option fee is valid according to Trec. The agent should deliver the check to the sellers and tell them not to cash the check until the option fee period Is over.
Frightening how many agents don’t know this…. and don’t actually READ the promulgated forms.
Thank you for the responses. I’m not the buyers agent, I’m the Listing Broker & clearly understand the paragraph. I found it interesting this question was posed when my office is experiencing this situation with another office. I knew that I was right but sometimes, you just want someone else to back you up. Thank you again for the responses!
Michelle, there’s no sending the check unless you’re sending it by courier or mail with a receipt requested and early enough for it to arrive within the 3 days. That check needs to be delivered and signed for, if you want proof of delivery and you definitely want that proof. The check is not to be left at the title company either. It must be delivered to the seller or the seller’s broker.
@ Michelle. Real simple. If the Option Fee wasn’t receipted by the Seller, or the Seller’s Broker within 3 days of the effective date of the contract, NO OPTION PERIOD. Read the contract. The Seller can deposit it anytime they want. Depositing it has nothing to do with the performance. If the Buyer delivers the option check to the Buyer’s Agent and the Buyer’s Agent doesn’t deliver it, that is professional misconduct on the part of the Buyer’s Agent and whole other topic. The Buyer has no option period.
And…what if the Seller decides to deposit the Option Check once received even though it was not received within the 3-days is up? How does this affect the Option Time Period? Are the buyers able to terminate after their original desired inspection days if the Seller deposit the Option Check or does this paragraph become null & void no matter what & the seller has the right to keep the Option Check?
So interesting how this post comes up today. What if the buyers provided their Option Check to their Agent but their Agent does not send the check out to the Seller(s) or the Listing Broker until the 3rd AND is not received until 7-days later ?
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