Option Period - # of Days and amount?

Question

I'm making an offer on a house tomorrow morning but trying to understand a final detail about the option period.

I'm reading a lot of different numbers from different articles in terms of what is the ideal # of days in an options period for a buyer.

I am putting in an offer to buy but not sure how many days I should request. I expect to have 2 inspections done because there was extensive repairs done on the house a few years ago. I've been advised to do 5 days to be competitive, but that makes me very nervous in case I don't get the information from the inspectors in time, depending on their schedule and how long it takes them to send their reports and any estimates.

Is 10 days too much in the Austin market to be competitive? I'm considering 7 as an in between, and maybe request for extra days if the inspections are moving slow.

Also, is $500 option fee enough to be competitive, or should I give $1000?

Thanks!

Rick Reeder · Answer

@Stephen James - why two inspections?  Second opinion on everything, or something specific like wood-destroying insect inspection that the first inspector wouldn't cover?  You'll pay $400+ for an inspection, so if you're worried about paying for option, I'd say get a great inspector and put some of the $$ you'd use for the second one towards option payment. Rule of thumb around Austin is .1% of purchase price for option and 5-7 days for option.  So if the offer is $500K, I'd likely offer $500 for a 7 day option.  You should be able to schedule an inspection for 1-2 days out, and get the report back the next day.  There are websites (I've heard Punchlist, but haven't used it) where you can upload the whole inspection report and get repair estimates back.  In a market as hot as Austin you need to compensate the seller for taking the home off the market and you want to be competitive, so if you feel like this is the home for you, don't lose it over one or two hundred bucks.

Jennifer Ryan · Answer

Sellers are usually open to extending the "Option Period" once you're under contract. (Unless they've accepted a back-up contract for a better offer or they think a better one is coming in...)

Also, call your inspectors & get them tentatively lined up if you can.

Ryan Kelly · Answer

@Stephen James My first question is - do you have an agent? If so, your agent should track down the listing agent for # of offers and offer deadline. If you want to be competitive with multiple offers, you will want to offer the seller more money and fewer days regarding the option period. I have several clients offering $500 for a 3-4 day option period. No, you won't be able to get a lot of inspections done in that small window and the seller doesn't care. They control the deals currently on the market and they get to pick the offer that works best for them. Hire a GREAT home inspector and get the most information you can. Then just make a decision if you want to move forward, assuming you can win the home and get under contract. Best of luck!

Bruce Lynn · Answer

Tough situation....you probably want an option period in this case....I would would...to check out the foundation and plumbing at minimum....You can have your agent look at the Heat and AC and look at the manufacture year.   I would also have them give you a layperson's opinion on the foundation.....scope that sewer line if that was part of the foundation or plumbing repairs.    I'm no foundation expert, but I can point out when I see cracks and movement.

Stephen James · Answer

List price is 300 and I'm planning on offering 335k.

It's Austin, I'm not sure how many offers they have but almost every situation is multiple offer situation and Austin is insanely competitive, so I would say yes I have competition.

Roof may be mid life. AC could be old, not sure (not listed and seller never got back about that). There was a report for this property that they had work done on foundation, and extensive work done on the plumbing 3 years ago -- so that is where my worries lie. That is why I think I will need 2 inspections and my concern about a shorter option period.

The option period is the only time inspections are allowed to be done from what I understand from my agent.

Bruce Lynn · Answer

Do you have competition?  Then more money and less days is better for the seller and can make your more competitive.

What's the price of the property?

At one time I used to see $100 and 10 days....then for a long time it was 7 days and $100-$200....now I see up to $500 and 3-5 days.....or after you loose 3-4-5-10 properties people go to no option period.....and lock it up.

We see that quite a bit now....

You can look at it a lot of different ways.....what are you looking to gain from the inspection?  What's the worst case scenario and can you live with that?   What if AC units are bad?   What if roof is bad?   Can you do an inspection if you don't have an option period?   Can you ask for repairs if you don't have an option period?   Is there any other way to get out of the contract if you do an inspection and find something you can't live with?

Option Period - # of Days and amount?

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