Here’s the proper procedure for extending your buyer’s option period.
So your buyer is under contract, you just had an inspection done, and you think you’re finally ready to negotiate repairs. Then you read the inspection report and find out that the general inspector has recommended a specialized inspection for some aspect of the home—perhaps with an HVAC specialist, roofer, or electrician. Of course, there’s nothing wrong with taking a closer look to make sure everything is in proper, working condition, but the problem is that you’ve bumped up against the end of the option period. You simply won’t have time to order that second inspection and negotiate repairs before the option period expires.
What’s the play here? Naturally, we’ll submit an amendment extending the option period by enough days to allow for a second inspection and subsequent negotiations. However, here’s the biggest mistake that I see many agents make in this scenario: Failing to put a dollar amount on the amendment purchasing that additional option period. Wait—the buyer paid an option fee on the initial period, so doesn’t that cover for you for the second one? Absolutely not!
There’s a legal principle in contracts called ‘consideration,’ and it means that when someone provides something of value (like when the seller provided an option period), there must be some sort of reciprocal value provided to them. In other situations, courts have ruled that consideration can be non-monetary, but TREC attorneys have been very clear as to how this pertains to real estate: Extending the option period requires a second financial deposit.
That deposit doesn’t have to be significant; in fact, it could just be some relatively inconsequential amount. Regardless, there needs to be some sort of dollar amount on the amendment, or else most attorneys will declare the document to be invalid—even if all parties sign it. In that worst case scenario, your buyer loses all leverage to negotiate repairs!
So, remember that you can always extend your buyer’s option period, but be mindful of the proper protocol! If you have questions about this or any other real estate topic, please reach out to me. I routinely help agents navigate the tricky waters of real estate; if there’s ever anything I can do for you, give me a call or send an email my way!