From the Legal Hotline: Delivering the Option Fee
We often get questions about the different requirements for delivery of the option fee and delivery of the earnest money in the TREC residential contracts approved for mandatory use. The earnest money should be delivered to the title company, while the option fee should be delivered directly to the seller. Both should be delivered within three days after the effective date of the contract. However, if the last day to deliver the earnest money lands on a Saturday, Sunday, or legal holiday, this deadline is extended until the next day that is not a Saturday, Sunday, or legal holiday. The time to deliver the option fee is not affected by the weekend or legal holidays.
Iman Ali, associate counsel
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21 Comments on "When Should Option Fees and Earnest Money Be Delivered?"
AMEN! Truer words were never spoken
“directly to the seller”…does this also mean directly to the sellers agent within this 3 days?
My exact thought… why can’t it all be part of the transaction to one party? Seems the client has to deliver to the seller the option and then another trip to the title company which all parties will eventually end up at closing in the same place; deduct it then.. etc..
I agree. Why do we as a buyer’s agent have to go get the contract to title and then getting the option fee to the seller/seller’s agent. I don’t trust the post office to deliver the option fee in a timely manner. It would be way easier to have one place (title) to deposit all the money necessary for a contract!
I’m with you there. The Title company is good enough to hold a down payment toward the house, but not $100 (regardless if it is to be refunded at closing or not)?? SMH
Diana the answer to your question is yes deliver to seller’s agent.
I think when you take the Contract to Title Company you should take the Earnest and Option Fee at the same Time .No delay and will save a lot of trips to pick up Option for the Seller . also so agents know where the Fees are.
Title companies can’t receipt it for you… if you work with a particular Title Company regularly, they’ll often hold it for you for Seller pick-up, but that’s all they can do… at least that’s been my experience.
Please don’t ever leave an Option Check, for pickup, w/the title company.
The Option Fee works well because it helps Buyers to have at least some monetary risk during the Option Period, and the Sellers to at least receive something for taking their property off market if the Buyer terminates. During the recent hot market with Buyers getting frustrated over submitting offer after offer and getting beat out, it probably limited the number of offers that Buyers submitted on different properties simultaneously. And there are apps that let Buyers pay the Option Fee remotely (Venmo, Zoccam), so it doesn’t have to be a chore.
You’re so right, if buyer opts of deal. What about Seller not returning option check when deal goes through as agreed.
If it goes through as agreed, then the Title Company handles crediting the Buyer for the Option Fee provided that’s what was specified in Paragraph 23’s checkbox.
Consider this-the buyer’s agent who writes a cash contract with $5,000 earnest money with no option time tells the buyer to deliver the earnest money to the title co. Two weeks later, 2 days before closing the buyer changes his mind. One problem, neither the buyer or his agent ever took earnest money to the title company (buyers choicein acash deal) and title company never notified either agentthat there was no earnest money. Seller has no recourse and TAR attorneys say agent has no liability either. Scary
I’ve had similar situations in the past, so what I now tell every buyer (or buyer’s agent) is that my sellers won’t respond to an offer that isn’t accompanied by earnest money. (If they prefer to send the money to the title company, that’s fine, but it would need to be there before seller responds.) There can infrequently be some extenuating circumstances, but it can also help sort out the tire kickers faster.