Who pays to extend the option period?

Translate this page
A hand holds several $100 bills.

11/26/2014 | Author: Editorial Staff

My buyer client is on the eighth day of his 10-day option period, and the seller still hasn’t turned on the utilities to allow the buyer to have the property inspected.  The seller promised to have the utilities on next week, so my buyer just wants to extend the option period another 10 days. Will the buyer have to pay another option fee even though the extension is because the seller breached the contract?

Yes. If the buyer chooses to request an extension of the termination-option period instead of exercising the default remedies available to him in Paragraph 15, then he must agree to pay an additional option fee to the seller to ensure that the extension is legally enforceable.

Read more legal FAQs on texasrealestate.com

Categories: Legal
Tags: legal, legal faq, contracts, forms, termination option period


adolph e guzman on 12/20/2014

Chris is spot on about consideration;  it is not always ‘money’.
A ‘promise for a promise’;  ‘for love and affection’, can also substitute
for ‘money’.....Chris, I seriously doubt you will find precedent from appeals court and higher court (Supreme Court, whether Texas, or U.S. Scotus) because of the
common law definition of ‘consideration’ as you aptly mentioned in
the court cases.  Great research, Chris!

Stephen Williams on 12/10/2014

I concur with Patty, Ty, and have shared Claude’s concern as well.  My question isn’t about utilities and option fees.  The simple solution to me and several others is to “write in” that option period begins when utilities on and buyer notified by seller.

My question, as apparently might be Claude’s and others, is, how do we know where the line is between “simple solutions” and “practicing law”? Spare me the obvious, and address the gray area.  Is it just a matter of using one’s common sense?  Now a days, there doesn’t seem to be much common about common sense.

Jose Nable on 12/02/2014

I have at least on three occasions encountered this situation where time was running out or had run out on the option period precisely because the utilities weren’t on. On two of them we had used the amendment form to extend the option period at no extra cost. On the third, listing agent was just too slow we never got it signed and extended. But, it still went through without any hitch. Reason? I believe in today’s business communication, our emails help us a lot. It keeps a time line of what is going on in the transaction. When they reply, they have acknowledged the information. Although it is not in writing on a contract, it keeps everybody in line most of the time.

As for de-winterization, there are a lot of inspectors out there who will even do this for you at no extra charge.

It would be a good ides to have an A and B option period to use. The B if the buyer knows the utilities are off as Ty Zeller suggested.

On dollar amounts, $1 or $10 or $100, it does not make a difference. It is what price both have agreed on. No one can dictate that.

Glenda Smith on 12/01/2014

Overlooked adding this comment to my previous comment.
Not sure someone could legally turn on utilities in a property they don’t own or for which both parties haven’t already signed a lease agreement.

Glenda Smith on 12/01/2014

It is not fair that the buyer should have to continue paying additional fees at the discretion of the sellers negligence.  We could certainly address this issue the next time contracts are up for review by we Realtors, prior to the new contracts being published for our use.  I’m surprised this hasn’t already been an issue.

Claude Humbert on 11/29/2014

I agree with Ty and Patty about adding a note saying that the option period would begin after the utilities have been turned in; however, I am wondering whether or not attorneys (who want to control everything) may consider that, by doing so, we are practicing law!

Chris on 11/29/2014

My comment was directed toward the author’s statement “then he must pay an additional option fee to the seller” because I want to be given, as well as my fellow realtors, accurate information so we don’t end up in court thinking we were right because we have been given wrong information by our very own Realtor Association. Because so many believe what certainly appears to be a false statement, this just increases the likelihood of litigation. In fact the San Antonio Appeals Court has stated “A promise for a promise is sufficient consideration in Texas.” Copeland V. Alsobrook, 3 S.W.3rd, 598, (TX 4th Ct. 1999), quoting the appeals court in Beaumont. 
Again, I ask for definitive precedent to prove the statement that money does have to exchange hands again to extend the option period. I certainly want to do the right thing, but who should I believe, the Courts or the Texas Association of Realtors who have not yet provided precedent to substantiate their statement.
I would also like to point out that the option fee agreement in it’s current form is a very time consuming issue. We cannot leave the money with the title company but have to chase down the listing agent or their broker.

Stuart Scholer on 11/28/2014

I’d rather have my Buyer just pay $10 and sleep better. Don’t have time to go to court with or against my Client to prove some precedent or defend my incompetence.  No winners there.

Debbie Russell on 11/27/2014

Ty, yes this is a decent alternative indeed.

Ty Zeller on 11/27/2014

This works better than arguing about what is or isn’t consideration.  Those of us who have fought these types of battles in court know that there are MANY other forms or substitutes for consideration that would bind an option period not the least of which is RELIANCE on the word of the Seller.

To keep from getting in these kinds of pissing matches though, I like the following:

“The ten (10) day option period shall begin on the day that the utilities are turned on AND Buyer is notified by Seller of such”.

Chris on 11/27/2014

Again, I would respectfully request the author, or anyone else thinking money is the only source of consideration to extend an option period on a TAR contract,  to please provide legal Texas Precedent, including the author.
If my Buyer has proven they are qualified to buy the property and agrees to continue the analysis of the property for the purposes of purchase from the seller, in exchange of the Seller extending the option period through amendment, without further funds exchanging hands, I believe that is valid consideration. 
“Consideration is a present exchange bargained for in return for a promise. Connell v. Provident Life & Accident Ins. Co., 148 Tex. 811, 314-15, 224 S.W.2d 194, 196 (1949). It consists of either a benefit to the promisor or a detriment to the promisee. See, e.g., Tripp Village Joint Venture v. MBank Lincoln Centre, 774 S.W.2d 746, 749 (Tex.App.—Dallas 1989, writ denied). The detriment must induce the making of the promise, and the promise must induce the incurring of the detriment. See Broadnax v. Ledbetter, 100 Tex. 375, 378, 99 S.W. 1111, 1112 (1907).” Roark v. STALLWORTH OIL AND GAS, INC, 813 SW 2d 492 - Tex: Supreme Court 1991
Again, if anyone has legal precedent to the contrary, I would greatly appreciate reading it.

Vida on 11/26/2014

To protect your buyer get an amendment signed extending the option with whatever amount the seller agrees to, get it executed prior to original option and deliver the check and keep a copy of check.  I would never allow the other agent to pay for the fee.  We have a restrict office policy regarding delivery of option checks to always protect our buyers.
In regards to utilities, I recommend to ask for a longer option period upfront if you anticipate seller delays.

Stuart Scholer on 11/26/2014

In other transactions where a symbolic “consideration” is required such as a sale of a vehicle (father gifting to a son) or in real estate between family members etc. the most common and accepted figure is $10. I think I would stick with at least that much AND then make sure the money was delivered as the contract calls for. It would make an Agent look pretty incompetent if the Buyer could not recoup their EM because now the Seller interprets that there WAS NOT consideration and the Buyer never really extended the option.

NISAR A MUNSHEY on 11/26/2014






Patty Brooks on 11/26/2014

If the Buyer knew the utilities were not on when they went under contract perhaps the buyer’s agent could have used the Special Provisions Paragraph to specify that the Option Period would commence within 24 hours of the Seller confirming, in writing, that all the utilities were turned on for the inspection. My Broker’s listing agreement explicitly states that the Seller will have all the utilities turned on for the entire duration of the listing (with the exception of foreclosures).

Pat on 11/26/2014

dkgs, you are right on.  If an agent doesn’t know what the meaning of “consideration” is in a contract to purchase real estate, they have no business conducting transactions for real estate.  Go back to school PLEASE!!

Pat on 11/26/2014

Consideration means MONEY in a real estate contract and in a court of law, which is where it matters (when you’re sued), there must be consideration “MONEY” given to the seller to extend the option period or it means nothing.  $1 is not of value in this day and age so something more like $10-$20 is definitely in order.

Edith Schreiber on 11/26/2014

I’m with Brian above - option period and any extension require $$$ -whatever amount buyer provides to seller will of course get credited back to buyer if they stipulate it in the contract (Item #23 - Termination Option).  Good conversation!

Mike Sanders on 11/26/2014

I would think the extension of the option period can be done by using the same amendment form we use to change other things in the contract.  The extension of the option period and the acceptance of the extended period, with or without additional money deposited should be the choice of our seller.  If they sign the amendment without requiring additional money so be it, it is an agreement between parties.

Tom on 11/26/2014

I just wrote a contract for a modular home.  Unfortunately, the current lender does not finance a wheel estate with a guest house. While the borrower was looking for other lenders who would, I extended option period with $1.00 consideration. Buyer was going to bring by the $1, but the listing agent wanted to pay for the buyer.  Comments?

LisaB on 11/26/2014

Bank owned property
No option fee requested by bank
Option period requested by bank
Prop is winterized & 10 day option period requested by buyer
De-winterization was supposed to be 3 days
Now at 5 days
Possibly not enough time for inspection & any other required inspections/contractors

Vida on 11/26/2014

Yes, consideration in a real estate transaction typically means something of value, as everyone has suggested it could be as little as $1, or a cup of coffee, it is the consideration accepted between the buyer and the seller. 
The language of the contracts are open to interpretation unfortunately and they are not written as black and white.
These type of forums are to discuss and ask questions, so please refrain from being condescending, we are all colleagues.  And frankly I would worries more about agents that don’t ask questions.  Best regards. 

Chris on 11/26/2014

Even keeping someone considering a certain property to purchase, IE: in an option period, is consideration for the purchase of a property. If a seller has only one prospect while expenses keep mounting, they may, just for consideration of the possible purchase, want to extend the option period.
Again, I would like to see some case precedent before I agree with this article.

Josh Carpenter (Central Metro Realty) on 11/26/2014

In the given scenario the buyer can terminate or the seller can agree to extend, I don’t feel like my clients (as buyers) would be obligated to offer any more money for the extended option period. Also the buyer can have the utilities turned on for a day to conduct inspections. I wouldn’t wait for the seller to have this done, I would have encouraged my client arrange the utilities to be turned on for the day of the inspection.  I agree with dkgs, this is pretty basic stuff. I hope this isn’t a common problem.

Sue Bradbury on 11/26/2014

This is certiantly something that needs to be brought up to change the date for the option period to begin on the date the seller has the utilities available for the inspections . Would prevent this from happining. Possiblity have the option for the buyer to have them turned on if seller does not comply with-in a reasonable time say 5 days… and have the seller to reimburse the buyer for the expenses. Like it reads about the required repairs.

Ernie on 11/26/2014

I agree with dkgs, this is very basic stuff.
I agree with Debbie Russell. Pay $1.00 and extend option the number of days it took seller to connect utilities.

Debbie Russell on 11/26/2014

I agree!  Yes the article did not address the fact that the seller is in default by not having utilities on unless it has been disclosed upfront by a written agreement there will be no utiilties on or that turning the utilities on are the expense and burden of the buyer - either way - the buyer is protected - the buyer can walk - terminate - not put any additional time or money into the deal - OR NOT - it is the buyers choice IF the seller signes the amendment for the extra option time and option money.

Brian on 11/26/2014

Chris- Don’t confuse earnest money with option money. The buyer’s promise to buy is valuable consideration to bind a contract; but to create an option you need money. They are two separate issues.

Sam Gentry on 11/26/2014

I guess I would encourage my buyer to pay a few more bucks to extend.  But I think I would be in the agents face and put seller on notice that they are in breach of contract for not having utilities on.

dkgs on 11/26/2014

Chris, from a legal perspective ‘consideration’ means something of value usually currency. No dollars No days. It doesn’t mean ‘thinking about it’.

Frankly if an agent is asking this question, I wonder why they are being allowed to conduct transactions. This is basic basic stuff and pretty scary that ANY licensed agent doesn’t know this.

Debbie Russell on 11/26/2014

Just think of the option period as a product, or a toll road with the option fee being the price the token you pay for the product or the toll road - then it’s easy to remember.  The seller would never want to pay a fee to give the buyer more time to terminate even if they did - it is the buyer’s burden - the fee can be small it can be $1.  in this particular case if I were the buyer I would not want to pay much more than that - but it’s all about what the buyer and the seller AGREE to!

Chris on 11/26/2014

It would certainly be nice if these legal opinions were backed up with precedent. Consideration can be the fact that the buyer is still considering the house and not walking away. My understanding is that consideration, not money, is what it takes for a contract to be, or remain valid.

Leave a Comment

Read our commenting policy

advertise with us

Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on texasrealestate.com. Any legal or other information found here, on texasrealestate.com, or at other sites to which we link, should be verified before it is relied upon.

Advice for REALTORS®

5 ways smart-home tech affects real estate transactions

5 apps that can keep you safe in—or before—a crisis

Is the eviction process different for manufactured homes?

3 places you can find free marketing content


More advice for REALTORS®