So now you have found that dream home what next?
Most contracts to purchase a preowned home start with an option period contract, what is an option period contract? You will hear lots of different ideas of what the option contract means all of which seem to be somewhat flawed in idealism. Basically what happens is you agree to purchase a home, you put up your earnest money to show your intent on purchasing the home, but wait that’s not the end.
An option contract is executed when the option fee is agreed upon (usually 25.00-100.00) and the option period time line is set (usually 3-10 days) by the buyer and seller, the option fee is basically a fee paid by the buyer to secure a period to inspect the home and still back out. There is a lot of problems with this idea, in no other instance can i find where you have to pay a non refundable fee to inspect the goods.
When was the last time you were at Best Buy to look for a T.V and before you could turn on the T.V. the sales person says wait I need 25.00 dollars that you don’t get back just to turn on the T.V., or when you were car shopping the Sales Person won’t let you test drive the car until you pay a 50.00 dollar fee? It is widely reported by the Real Estate sales Community the fee is because while you’re looking at buying the home and having your inspections the seller is taking the home off the market, this is just not the case, all the time during your option period the home is being marketed for back up contracts and in many cases the home is still being shown.
The option contract is a way to further tie you to the home, over the years the option fee has steadily increased and will probably do so in the future. The higher the fee the more compelled a buyer will become to not want to walk away from the fees but rather feel obligated to hang in there and negotiate the purchase of the home (at least that’s the plan devised). The one good thing about the fee is it does allow you to back out for any reason during this option period with the only damages due the seller are the option fee’s, although this sounds great in theory it is still a farce. Almost all of the time there are enough substantial repairs on an existing home, the inspection report alone is enough to be able to kill the deal on your end no matter how late in the game it becomes. Most lenders will not lend on a home with a substantial repairs if they are made aware of the defects. Not securing your loan is grounds to terminate the contract.
Now that we understand a little about the OPTION PERIOD CONTRACT it seems a little ludicrous that without paying the seller a fee you do not have the right to inspect the goods, this Option Period Contract may be a way to circumvent numerous Laws. We talked about the Car Dealer above, if the idea the seller is being paid for taking the home off the market and losing perspective buyers couldn’t the same thing be said about the car dealer, while you are out test driving a car they could lose sales, yet you do not have to pay them a fee or while trying out that new TV another prospective buyer can’t look at that TV. It is the cost of doing business. We will go a step further, while your realtor is out showing you a house, they are losing perspective clients, yet you are not paying a fee to them while they are out with you.
Don’t forget you already put up Ernest money to show your good faith on the purchase of the home, the Option Period is just another Poor Tactic Used in the purchase of your home. Be smart Limit your amount of damages by negotiating long option periods with a low option fee being paid.
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