So that happened. I don’t know how it works in other states, but in Texas you are given the option to terminate a contract on a home you’re purchasing for a negotiable number of days and for a negotiable amount of money. In this case, my buyers, in consideration of $200, had ten days to terminate the contract on this home for any reason whatsoever, or no reason at all. Five days into the option period, they decided that the crime rate in the area was too high and they did not wish to proceed. More typically, something is uncovered in the inspection, and people choose to terminate over that issue. You do all of your inspections during the option period so that you can terminate the contract under these favorable conditions.
What are the repercussions of terminating during the option period? The consequences are actually pretty small. You lose your option money – in this case, that would be the $200 they paid. The option money goes directly to the seller – you are paying the seller for their risk during this time, and it is paid when your offer on the house is accepted. You sign a piece of paper saying you’re exercising the option, and that gets sent to the seller’s agent and to the title company. It has to go to the title company because you pay your earnest money to the title company when your offer on the home is accepted. The earnest money is part of the contract and lets the seller know you’re serious about buying their home (well, once the option period is up anyway). It’s a negotiable amount. You pay less in a buyer’s market, and more in a seller’s market. If a home is in a multiple offer situation, you can pay way more as a negotiating tool to win the bid. Even in a seller’s market though, you have some cases where you can pay less. If the home is in a less desirable location or isn’t going to win any beauty contests, you may pay less. This home was a flip – and a really well done one at that, but as my buyers decided, it was in a less than desirable location (the town they’re looking in is “budget-friendly” for the area – meaning lower priced). So their earnest money was 1% of the contract price. They’ll get all of it back from the title company, and they also exercised their option the night before any inspections occurred, so they didn’t lose any money there either.
You may be wondering why I would “let” my buyers try to buy a home in a crime-riddled neighborhood. Well, in all honesty, it isn’t. I looked it up after they used this reason, and it’s honestly in one of the safest areas of the town the home is in. However, they have one small child, and another on the way, so safety is paramount to them. I don’t blame them for having safety concerns. I will, however, say that no town is crime free. This is something I’ll have to address with them moving forward. At any rate, my determination to find this family a home remains high, and we will get it done!