We made an offer on a house in Texas, and it was accepted. We paid the $100 option fee, and the contract says it'll be applied to our account at closing.

There is also a contingency for selling our house and getting 3rd party financing.

If we don't exercise the option, but don't sell our house, thus don't have to buy the other one, is the option fee refunded? There's no mention of this in the contract.

Thanks

You bought the Option with that $100.00. This demonstrates that you are operating in good faith . . . . not just wasting their time.

If you don't exercise the Option before it expires, it will end and the Seller of the Option keeps the Option Money.

Look at it this way: they're selling you the opportunity to make the purchase, and they will wait awhile for you; but not forever. That waiting is what you're paying for, so they won't sell it to someone else in the meantime.

Consult an Attorney in Texas if you don't understand Contracts BEFORE you sign them.

Thanks for your answer. However, you're not correct when you say the seller keeps the option money if I don't exercise the option. As I said in my question, the contract states the money will be credited to me at closing.

So my question remains: If I don't exercise the option, but we don't close because I don't sell my existing home (per the contingency), THEN what happens to the $100?

If you buy the house, the $100 will be credited to you at closing. If you don't buy it, the sellers will keep your money. If you don't buy the house, you have not exercised your option.

If you're really worried about $100, home ownership might not be for you.

WOW...........You got off easy locking a property with all those contingencies for a measly 100 bucks.

This is just like a lease option in that you put the money down to be credited at closing.If you don't close you don't receive the credit and lose the option money.

I think you need to read your contract closer.

It's interesting how different things are from state to state...

The $100 bought you the unrestricted right to cancel the contract for a specified number of days after the contract execution date (check your contract for the exact number of days). This allows you time to get inspections done, have second thoughts, get a wild hair up your ****, whatever. During that time period you can cancel for any reason or no reason, and still get your earnest money back.

The option fee is not a deposit, it is a purchase - you are purchasing that time period, and that has nothing to do with any other contingencies on the contract. Even if your current house doesn't sell, or the financing falls through, or you don't end up buying the house for any reason - you still received what you paid for (the right to cancel during that time period).

Hope this helps...

It depends on the contract but usually you would lose it. You're paying for the option to choose later.

My word.. you're talking about a measly hundred bucks to tie up what? An asset worth $150,000-$250,000?

The last house I sold on contingency I had the Buyers pay $2,000. option money. It took almost two months from contract to close because they actually had a contingency on their house, also. We closed just about 2 weeks ago, but if it hadn't, at least I would have had $2000. for keeping the property off the market. You're getting off easy with only $100 option with a contract fraught with potential problems.

BTW, I live in TX.. and yes, (assuming you used a TREC form) the Seller keeps the option money if you don't close for any reason.

Some of you seem to be confusing "option" fee with "earnest money". In TX, the option fee allows the buyer the unrestricted right to cancel the contract within the specified time (option period...usually 7-10 days). If you choose to exercise the option to cancel the contract during the option period, you lose your option fee money, but get your earnest money back. If you back out for any reason after the option period, you do not get your option fee back, although based on what contingencies you have in your contract, and their time frames, you may/may not get your earnest money back.
Basically, if you don't close on the house the option fee is gone regardless.

I think Howard became confused because his Seller was gracious enough to apply the "option money" to the Purchase Price IF this proceeded to a Closing.

That kind gesture led Howard to believe that they might also give him the "Option Money" back even if he DID NOT purchase their property.

But if that were true, it would defy the whole rationale for even having had an option in the first place . . . . it would have been a meaningless waste of time.

I agree that a mere $100 is not very much money to have paid to exercise control over the asset while he sought out financing.

Howard hasn't come back to visit this Site since 9/27/10 . . . . so we'll probably never hear the "rest of the story".

[quote=Vermont]I think Howard became confused because his Seller was gracious enough to apply the "option money" to the Purchase Price [b]IF[/b] this proceeded to a Closing.

That kind gesture led Howard to believe that they might also give him the "Option Money" back even if he [b]DID NOT[/b] purchase their property.

But if that were true, it would defy the whole rationale for even having had an option in the first place . . . . it would have been a meaningless waste of time.

I agree that a mere $100 is not very much money to have paid to exercise control over the asset while he sought out financing.

Howard hasn't come back to visit this Site since 9/27/10 . . . . so we'll probably never hear the [b]"rest of the story"[/b].[/quote]
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[b]If you close on the house, the option money is credited back to the buyer, if it is checked off on the contract that it will be credited back. In all of the contracts I've seen/written, it always is credited back to the buyer if they close. [/b]

But one has to ask . . . . If it is ALWAYS credited back at a Closing, then WHY do you suppose they have built in such a Check Box ?

Maybe because sometimes . . . . it is not ?

Regardless of what happens to the Option Money at the Closing of a successful Transaction, Howard's question appears to have pertained more to what happened to the Option Money he paid when there was NO CLOSING ?

[quote=Vermont][quote=TXrealtor]If you close on the house, the option money is credited back to the buyer, [b]if it is checked off on the contract that it will be credited back.[/b] In all of the contracts I've seen/written, it always is credited back to the buyer [b][u]if they close[/u][/b].[/quote]
But one has to ask . . . . If it is [b]ALWAYS[/b] credited back at a Closing, then [b]WHY[/b] do you suppose they have built in such a Check Box ?

Maybe because sometimes . . . . it is not ?

Regardless of what happens to the Option Money at the Closing of a successful Transaction, Howard's question appears to have pertained more to what happened to the Option Money he paid [b]when there was NO CLOSING ?[/b][/quote]

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Because in ALL of the contracts that I've seen executed the agent submitting the offer ALWAYS checks the box to have it credited to the buyer at closing. You'd have to be a pretty poor realtor to not check the box that credits it back.

Re Howard's question- You don't close, you lose your money.

I know this thread is old but I happened to be going through it to check out the type of posts and activity.

I think a lot of you will be surprised that if you make the error of making an option fee refundable, it has to be refunded.

So check with your attorney, but in the states I've done business in if you make the common error of making the option money applicable toward the cost of the property you will by case law (and statute) be making it earnest money, and therefore refundable.

So make your option fee small and not to be applied to the cost of the property, or make it non-refundable by not allowing it to be used as money in the deal, but strictly for the right to purchase a property at a certain price and terms for a certain period of time.

You may find out the hard way when you get a party on the other side with a little more knowledgeable then you. But so far the thinking above is prevalent and accepted, and wrong.

I once had a seller's attorney have to do a quick about face when I asked for my option money back and he told me to shove it, and I suggested to him and the state bar that he take a few more courses before he be allowed to continue practicing. Of course I had written the option that way on purpose as an out and this seller was trying to cover to much up but figured if I found out he could at least keep the sizeable option money.