Although the initial option fee should be sent to the title company, the fee to extend the termination option should be delivered directly to the seller.
Paragraph 6 on the Amendment form states, “Buyer has paid Seller an additional Option Fee… .” Because this language is in the past tense, it assumes that the additional option fee was paid to the seller before the amendment was signed. The amendment acts more like a receipt.
How Much Should the Fee to Extend the Option Fee Be?
The fee to extend the option period is a negotiable amount between the buyer and seller. There is no minimum or maximum amount. However, buyers should not enter $0 to extend the option period. If no money is paid, the buyer runs the risk that the option to terminate would not be enforceable. No matter how small the amount the parties agree to, the buyer should pay the seller. Failing to do so opens the door for the seller to claim the buyer did not fulfill the contractual obligation necessary to extend the option period.
How can the buyer paid an agreed-upon amount if the seller hasn’t signed anything yet? What if the buyer pays the seller an additional option fee and then the seller doesn’t extend the option?
Terminate the contract and protect your buyer.
The amendment to extend option period should also include the $$ amount and # of days of extension signed by both buyer and seller.
Can sellers agent receive option fee extension as his representative?
Seller Has to receive to ( acknowledge and agree) the fee and sign off on the Amendment. Remember, the contract is between two Parties (Seller and Buyer).
Excellent point in extending the option period. It’s all in the context and the smart agent must follow what’s written in the Amendment.
Does the new OP fee get credited if Seller and Buyer moves forward with the sale?
This is wildly frustrating to me. TREC waffles on this issue, as I have notes from a conversation via TREC Legal Hotline on 3-1-21. I represented Seller, and Buyer never paid additional option fee. They waffle on interpretation, on consequence, and intent. Why is “buyer runs the risk” and “opens the door” good enough advice for what happens if buyer doesn’t pay additional fee timely? Why not clarify this to the extent initial option fee payment is clear?
Completely agree! We need TREC to make this cut & dry.
Based upon an opinion on this same website dated Oct 29, 2012, a court might find a $1.00 might not satisfy legal requirements. Not only that but I have suggested to TAR anhd TREC that is not fair to make a buyer pay an option extension fee when the option period is being extended to allow the seller to do his due diligence to get bids for repairs. Sometimes it is the fact that bids are not something that can be gotten in a timely fashion right now so the buyer is the “one” who has the extend the option… Read more »
Because of this competetive market, sellers could stop requiring such short option periods ie 3 days, then buyers would have sufficient time to do their due diligence & sellers would have sufficient time to respond after getting estimates, etc. Also, buyers could get all contractors, inspectors etc, in at the same time to help time manage the option period.
I remember that! What about $10? I suppose that a typical Seller would not mind signing a receipt/extension indicating that they had received such a small amount of money regardless of whether they really had or not. It seems to me that the past tense language and the urgency of the timing sort of forces such an action.
Great topic… TREC should fix the amendment form to make the $ optional, the payment to title within 3 days and credit at closing. This will help synch with new option clause… The $ should be optional because staying under contract is consideration or the seller could just say no to the extension. If they say yes it clearly means it was of value to remain under contract. The amendment can change other criteria like closing date without $. Also the extension is often requested by the seller since they would like to get 2nd opinion or estimates… It would… Read more »
And it can be given the sellers agent as before, not directly to the seller. Right!
I honestly think the additional extension option should go through the title company as well for the protection of both parties. There is also a simple paper trail there.
I agree!
Exactly, seems to be the best way to do it!
Can you just prepare an amendment revising the number of days for the option period in special provisions?
No, at least not as of the last time I called the TAR Legal Hotline. If this was allowed all the headache and frustration with Option extensions would be solved. Unfortunately buyers wait until the last minute to extend the option and it’s just not practical or often possible to physically to pickup funds from the buyer and deliver to the seller in time. Terminating the contract to protect the EM is the only other recourse at this time.