My buyer client is on the eighth day of his 10-day termination-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 termination-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 in this situation chooses to request an extension of the termination-option period instead of exercising the default remedies available to him in the contract, then he must agree to offer something of value as consideration to the seller to ensure that the extension is legally enforceable. This is often done by paying an additional termination-option fee.
Extensive case law in Texas suggests a termination-option period cannot be extended without an additional option fee, so a buyer should pay another option fee to reliably extend the option period.
Can it be an amount such as $1.00?
I don’t think so. I’ve read in other posts that the amount has to be of “reasonable value.” I’ve put $1.00 on mine for years, but I’ve had to change since I read that.
just like $10 its negotiable a$1 is, i asked the sellers agent if a $1 was reasonable for the seller and sellers said yes, so a $1 was it.
How about amend the effective date? All utilities should be available from day one.
That’s what I was thinking, utilities on from day one. Although I would not have waited until day 8 to bring this up!
could someone please let me know if amending the executed date works in this situation
Seller is potentially in breach of paragraph 7.A. (Talk to an attorney, yada yada). Amending the executed date would be wrong, in my opinion. It would not reflect what actually transpired and attorney’s could have a field day with that if there are issues requiring litigation. Also, there are several other performance standards tied to the effective date that don’t need to be messed with. Why not have buyer pay additional option money? If $1 isn’t enough (not sure why not – we use “nominal consideration” to secure time to deliver option money in the first place!) then make it… Read more »
That’s a great idea. That way the buyer won’t have to pay anything.
I agree. The sellers agent should extend the date without paying any fess based on the sellers inability to have an inspection performed.
I am confused, section 7 of the 1-4 residential contract says that buyer will turn the utilities on. Section 15 says the buyer may enforce specific performance. Would like to understand the case law reference in more detail within the article. Assuming the seller refuses to turn on the utilities and the parties go to court, why would the determination be made that the buyer needed to pay for an extension to the option period since the Seller was compelled contractually to “immediately” turn on the utilities? It would seem to me that one action preceding another would warrant delay… Read more »
Yeah I would have worded option period to begin on day utilities were turned on.
How would you do that? Any attempt at writing that language could be construed as a practice of law, something most of us must avoid!
NOT Buyer responsibility: ” Seller at Seller’s expense shall immediately cause existing utilities to be turned on and shall keep the utilities on during the time this contract is in effect.”
How do you word anything on a contract? Whether it’s special provisions, or repairs, etc,
See Hank’s response below.
It’s already in Paragraph 7 that the Seller immediately turn on the utilities, if that was going to be a problem, then the Seller agent should put something in special provisions that it’s on the Buyer are there are no utilities for whatever reason. The TAR article, from a lawyer’s perspective, says that the Buyer needs to pay for the extension. Since most of us aren’t attorneys and cannot practice law in real estate, can TAR explain the rationale for the Buyer losing the argument that the utilities should first be turned on? Perhaps TREC should add something to Paragraph… Read more »
In this situation, I think there are a couple of options. (1) Amend the execution date or (2) ask for a refund the the additional option fee as a contribution to closing (Section 12) while carefully documenting that the reason for the extension is due to seller’s inaction (perhaps in Special Provisions.) It’s just not fair for the buyer to pay an addition fee under these circumstances.
Since the option fee can be credited at closing already it isn’t costing the buyer anything extra as long as the option isn’t exercised. So the seller would have no reason to offer that as a contribution.
TREC enforcement told me years ago that in this situation you would be allowed to state in Para 11 that the option period was not to start till 24 hours after the buyer & their agent were notified that all utilities had been turned on.
This is a good suggestion, Hank. The buyer’s agent should be aware of the fact that the utilities are not On when the contract is executed. You cannot trust the seller’s good faith, and therefore, it needs to be specified in the contract. I do not believe you can change the “execution date”, since that is history, and it is not “optional” as to what date the contract was executed. You could suggest the buyer offer a “$10 Option Fee”, but even that seems unnecessary when the seller is the one responsible for the default. ~You never ever let a… Read more »
For purposes of discussion, TREC already allows for an effective date to be amended in at least one circumstance: Look at Par. B of the Addendum for “Back-up” Contract. It allows an amended effective date and even defines the term “Amended Effective Date.”
Another good thought!
Good suggestion. Thanks Hank for let us know.
Thanks Hank
Ridiculous for Buyer to have to pay for Seller not following contract!!! Could we add verbage in Special Prov, or else ask TREC to add one more sentence on Defaulting. ..in this case, raises ? of whether Seller has something to ‘hide’???
Why the buyer has to pay another $100.00? It is Seller Responsibility to turn on the utilities ?
Extension should be for $00.00
I am normally a seller’s agent, but this seems wrong. The Seller is supposed to be obligated to have utilities on for inspections, so I don’t know why TREC would say that Buyer has to pay more to extend option. Seems like just an Amendment to extend the option period. Buyer has already paid for his option in good faith that he could get the inspection done in the length of time he was given. Now, if the Buyer had drug his feet and not made arrangements for an inspection, that is another matter.
Now from an Inspector point of view. 🙂 Showing up for an inspection and you find the power and/or the water off. Un-Professional. I want nothing to do with you or your business. How hard can it be to remember a few “must do” things. TREC standards state we are NOT to open closed valves or energize any turned off system. I have had to do it many times over the years. We are forced into doing it or loose hundreds of dollars standing around or doing an incomplete inspection. It’s so common, that I have learned that when you… Read more »
Buyer’s agent should have anticipated signing for an option period to begin when utilities were turned on. This was a no-win situation for the buyer.
Seems like this question has stirred up quite a few issues… > Please check with your favorite Real Estate Attorney, but I don’t think you can amend the Execution Date once a contract has been agreed to. That is a historical fact that cannot be changed. ~It is not an issue that the buyer and seller have “agreed” to, and it would amount to a false statement. > We are not talking about granting the buyer a new option period; we are talking about extending the current option period that the seller has already been paid for. And since the… Read more »
TREC has already figured out a way to extend an option period such that no extra funds are required of the buyer. It involves amending the effective date, not the execution date. I don’t think TREC ever refers to “execution date.” TREC allows for an effective date to be amended in at least one circumstance: Look at Par. B of the Addendum for “Back-up” Contract. It allows an amended effective date and even defines the term “Amended Effective Date.” TREC goes on to spells out that the option period continues beyond the Amended Effective Date. TREC is obviously ok with… Read more »
Sorry to open up a conversation from 4 years ago, but I have a crazy twist to the above question. My buyer client is on the 3rd extension because the seller has not had the gas turned on to complete the inspection. We’ve paid the additional money for the extension; however, we’ve been promised that the gas would be on and confirmation sent but still no gas. Is this grounds for breach of contract OR would it be wise for the buyer to terminate the transaction? Is there some kind of recourse for the buyer?