It’s the last day of my buyer’s option period. The buyer and seller are still negotiating repairs and want to extend the option period. How do we do that?
Use TREC’s Amendment to the contract (TAR 1903, TREC 39-8) and fill in an amount acceptable to both parties in Paragraph 6. There must be an amount included in Paragraph 6. For instance, putting “$0” in the blank may risk the extension being held unenforceable.
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21 Comments on "How to Extend an Option Period"
So…as a rule, there should Always be an amount????
But what if the seller specifically agrees to $0? Option fees are negotiable so why can’t we negotiate $0 if both parties are in agreement?
You could probably just enter in $1.00, or some small figure.
While putting a dollar amount might not seem logical, attorneys tell us that “valuable consideration” is legally important here, to be sure the contract is enforceable. I wouldn’t take the risk of ignoring that and putting my client at risk. Many years ago, $1 was sufficient. My firm’s compliance officer recommends $10 in today’s dollars.
It all goes back to consideration:
https://dictionary.law.com/Default.aspx?selected=305
The consideration for the additional time is the monetary amount. $0 means zero consideration.
An attorney told me “valuable consideration” doesn’t have to be money, just something valuable to the seller. For example, the buyer agreeing to continue with the transaction may be valuable to the seller, but that would need to be confirmed.
You are trying to make your contract solid and make sure it stands up to a courts scrutiny. You can put nothing or 0 or $1.00, but if things go sideways your contract or your amendment will be ruled invalid should you actually go to court over a problem. This also means you would lose in Arbitration and be shown as the defaulting party.
Should there be an additional box on page 10 stating the amount and receipt for this
The amendment also states the “Buyer has paid Seller an additional Option fee” Seller should receive the payment with or before the amendment.
Simply put, it’s another nonsensical answer by TAR. Local, state, & national real estate entities always say that EVERYTHING is negotiable, but apparently to extend an option period there “MUST” be at least $1 based on what they say…? Makes absolutely no sense! if both parties agree to extend the option period without anymore money being exchanged it’s their choice because EVERYTHING is negotiable!
While putting a dollar amount might not seem logical, attorneys tell us that “valuable consideration” is legally important here, to be sure the contract is enforceable. I wouldn’t take the risk of ignoring that and putting my client at risk of having to buy a home as is. Many years ago, $1 was sufficient. My firm’s compliance officer recommends $10 in today’s dollars.
The answer given by TAR was from a member of the “staff.” ~How about we get a definitive answer from an Attorney…?
Here is the real point: We are not talking about creating a “new” Option Period; we are talking about amending the date (term) of the original Option Period. “Consideration” was given to the seller when the original fee was paid. Changing the end date of the Option Period is simply a modification of the terms of the contract …And that is what an amendment does…..
All legal information published by the association, such as this post, is reviewed by at least one TAR attorney prior to publication.
Let’s make the point even more clear:
What if the original Option Period has expired, …and the parties wish to create a second Option Period…? The buyer and seller can agree to start another Option Period in the middle of the contract, and then the buyer would have to give the seller some “consideration” for that option. …And then you would need a second ‘receipt’ for the option fee …which is not provided for on the contract, and, Yes, it would be an amendment to the original contract.
Situation just occurred. Buyer had a 7 day option period for $100. Buyer had inspections done and requested an expert opinion (structural inspection) and repair if needed. Seller was unable to obtain the 2nd opinion prior to the buyer’s option period expiring. Seller requested an extension of the option period. In this case, it was very awkward to ask the buyers for additional consideration when the sellers were making the request to extend. Ultimately it was extended with zero consideration. I’d appreciate a legal opinion.
For an answer about your specific situation, please call the TAR Legal Hotline at 800-873-9155. Although TAR attorneys review every legal item published on this website–and often monitor the comments–they do not answer questions in the comments or via email.
Seller didn’t want to lose the buyer. So what would have happened if the agents stood the TAR and compliance officer’s ground and told the parties that option fee had to be at least $10? Who would have paid the $10? If buyer refused, would seller have been willing to give the buyers ten bucks to extend? If that would be ok with buyers, then “valuable consideration” would indeed be $-10.00. Yes, negative ten dollars. Go figure!
So what’s it goin to be… semantics… or protect your Buyer’s right to the Option? If you want to make sure you will be considered a competent Agent then you better deliver $10 to the Seller. If I have to deliver the fee myself then I just pay the $10 out of my pocket. Can’t buy anything else with it anyway.
The first time you end up in court will teach you why you need to use appropriate consideration. $ 0 and $1 dollar won’t cut it