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.
So…as a rule, there should Always be an amount????
Always.
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.
Many sellers don’t want to lose a buyer over a few days. It would be of value to them for the buyer to continue with the contract. I’d even bet some sellers would actually pay the buyer $10 just to stay in the contract. Then “valuable consideration” paid by buyer would be $-10.00. It would seem the task here is to determine what the seller would accept as “valuable consideration.” You can suggest some “valuable consideration”, get the listing agent to confirm in an email that it’s acceptable to Seller, and put that in an amendment. If the listing agent… Read more »
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.
THATS A GOOD QUESTION, and there is nothing anywhere which clarity’s when it gets paid. I can only assume since it states the buyer has paid (past tense) it means that its paid along with the signing of 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.
This is just going to muddy the waters of the contract and give cause for more revisions to be made. Option fee has to be “receipted” and the contract says within 3 days after the Effective Date. The Amendment does not distinguish any difference in the additional option fee and the original option fee so the same time frame and receipting applies. I understand this in commercial and even land contracts where the option or feasibility periods are much longer and the option fees are usually larger but this is ridiculous in the 1-4 Res contracts . It should just… Read more »
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
What is the correct way to receipt the additional option fee?
Very good question Nancy. The wording indicates Seller has received the amount noted in the blank, so apparently the Amendment itself serves is a receipt.
Hello, we are buying a house and under contract. we have completed signed house contract and it has been since April 1st. But per selling agent, the seller’s daughter who said she is the her father’s power of attorney, tried to cancel the contract due to her father is in stage not capable to make any kind of decisions his own. But we have not received any written letter on the cancel the contract from seller’s side. But her brothers said that her father does not have any problems to make decisions his own. They ask us to extend option… Read more »
What amount can be put for extending option period? Is $1.00 OK? Should it be more?
Just tried to call the legal hotline and they apparently closed 13 min early on a Friday 😞
Anyway, here’s what I want to know. What if I were to extend the option period by executing an amendment that says “The Option Period described in paragraph 22 is changed to [x] days”?
Why wouldn’t that hold-up in court?