The option period is the most important window in a Texas home sale for both buyers and sellers. It is a negotiated number of days after the contract is executed during which the buyer can terminate for any reason and receive their earnest money back. For sellers, it is the most uncertain stretch of the transaction. Understanding how it works, what the buyer can and cannot do during it, and what "as-is" actually means under the contract is essential to protecting your position.

This guide is written from the seller's perspective. It covers the mechanics of the option period, the option fee, the critical 5:00 PM deadline, the Paragraph 7D as-is clause that confuses almost everyone, and the strategic decisions sellers face during this window.

In this article:

What is the option period?

The option period is a negotiated timeframe, written into the TREC purchase contract (Paragraph 23 in the current One to Four Family Residential Contract, TREC 20-18), during which the buyer has the unrestricted right to terminate the contract for any reason. In exchange for this right, the buyer pays the seller a nonrefundable option fee.

The purpose of the option period is to give the buyer time to conduct due diligence: home inspections, specialty inspections like roof, foundation, pool, or environmental testing, and any other evaluation the buyer wants to complete before fully committing to the purchase. It exists to reduce litigation after closing by letting the buyer uncover problems before the sale is final rather than discovering them afterward.

The option period is not required. It is a negotiated term. The buyer can choose not to request one, and the seller can decline to agree to one. In practice, almost every Texas residential resale contract includes an option period because both parties benefit from a structured due diligence window.

How the option period works, step by step

The timeline is straightforward, but the details matter.

Step 1: The buyer offers an option period in the contract

When the buyer submits their offer, they specify two things in Paragraph 23: the option fee amount and the length of the option period in calendar days. Common option periods range from 5 to 10 days. In competitive markets, buyers sometimes shorten this to 3 to 5 days to make their offer more attractive. For complex, older, or high-value properties, 10 to 14 days is not uncommon.

Step 2: You accept the offer and the effective date is set

Once you accept the offer (or the buyer accepts your counter), the contract has an effective date. The option period clock starts on the day after the effective date and runs for the number of calendar days specified. All days are calendar days, not business days. Weekends and holidays count.

Step 3: The buyer pays the option fee

Under the current TREC contract forms, the option fee must be delivered to the title company within three days after the effective date. This is a change from earlier versions where the fee was paid directly to the seller. The title company holds the fee and releases it to the seller. The option fee is nonrefundable regardless of the outcome.

Step 4: The buyer conducts inspections

During the option period, the buyer schedules inspections. Under Paragraph 7A of the contract, you as the seller must allow the buyer and their inspectors access to the property at reasonable times. You must also keep the utilities on during the entire contract period to facilitate inspections. The only inspection that requires your written approval is hydrostatic testing of the foundation.

Step 5: The buyer decides

Before 5:00 PM local time on the last day of the option period, the buyer must choose one of three paths: proceed with the purchase, request repairs or credits through a formal amendment, or terminate the contract. If the buyer terminates within the option period, they lose the option fee but receive their full earnest money back.

The option fee vs. earnest money

These are two separate payments that serve two different purposes. Confusing them is one of the most common mistakes in Texas real estate.

The option fee is a nonrefundable payment from the buyer to you, the seller. It purchases the buyer's right to terminate the contract for any reason during the option period. Think of it as the price of the buyer's due diligence window. Common amounts range from $100 to $500 for standard homes. In competitive markets, buyers may offer $1,000 or more to strengthen their offer. The option fee is credited toward the purchase price if the sale closes.

Earnest money is a separate, typically larger deposit held by the title company. It demonstrates the buyer's good faith commitment to the purchase. Common amounts range from 1% to 3% of the purchase price. Earnest money is handled according to the contract terms. If the buyer terminates within the option period, the earnest money is refunded in full. If the buyer terminates after the option period without a valid contractual reason (like a financing contingency failure), the earnest money may be forfeited to the seller.

Here is the simple way to remember it: the option fee is the cost of the right to walk away. Earnest money is the cost of walking away too late.

The 5:00 PM deadline and why it matters

The option period expires at exactly 5:00 PM local time to the property on the last day of the option period. This is one of the strictest deadlines in the entire transaction.

If the buyer delivers written termination notice at 5:01 PM, it is too late. The termination is not effective. The buyer is now bound by the contract and cannot terminate under the option period provision. Time is of the essence in this provision, and courts have consistently upheld the strict application of this deadline.

The written termination notice should be delivered using the TREC Notice of Buyer's Termination of Contract form. Delivery must comply with Paragraph 21 of the contract, which specifies acceptable delivery methods.

What this means for sellers: If you receive a termination notice, check the time and date carefully. If it was delivered after 5:00 PM on the last day, it may not be valid. Consult with your broker before responding.

Paragraph 7D: what "as-is" really means

This is the section of the TREC contract that causes more confusion than any other. Paragraph 7D, titled "Acceptance of Property Condition," defines what "as-is" means and presents the buyer with two choices. Understanding both choices, and understanding what "as-is" does and does not waive, is critical for sellers.

The definition

The contract defines "as-is" as follows: the present condition of the property with any and all defects and without warranty except for the warranties of title and the warranties in the contract. That sounds final. It sounds like the buyer is accepting everything and giving up all rights. That is not what it means.

The two choices

Paragraph 7D(1): Buyer accepts the property as-is. The buyer agrees to purchase the home in its current condition at the time the contract is signed. The buyer is not asking you to make any repairs as part of the initial contract. This is the most common selection. It does not mean the buyer has waived their rights. It means the buyer is not requiring repairs upfront as a condition of the contract.

Paragraph 7D(2): Buyer accepts the property as-is provided the seller completes specific repairs. The buyer agrees to purchase the property in its current condition, but only if you complete specific, named repairs or treatments listed in the contract. This option is used when there is a known issue at the time of the offer. For example, if your Seller's Disclosure Notice indicates the HVAC system is not working, the buyer might check 7D(2) and write in "Seller shall repair or replace the HVAC system prior to closing."

Paragraph 7D(2) is not a blank check for the buyer to list repairs found later during inspection. It is specifically for issues that are known at the time the contract is written, typically from the Seller's Disclosure or from visible conditions the buyer observed during their viewing. Both boxes cannot be left blank. One must be checked. Leaving both blank or writing "repairs to be listed following inspection" in 7D(2) is considered negligent or incompetent by TREC and could result in a complaint against the agent.

What "as-is" does NOT mean

This is the part that confuses almost everyone, including some agents. The contract language is explicit. Checking the as-is box under either 7D(1) or 7D(2) does not waive the buyer's rights in three critical areas:

1. The buyer's right to inspect is preserved. Under Paragraph 7A, the buyer still has the right to hire a licensed inspector and conduct any inspection of the property they choose, at reasonable times, during the contract period. You must provide access and keep the utilities on. "As-is" does not mean "no inspection."

2. The buyer's option period is preserved. If the buyer purchased an option period under Paragraph 23, they can still terminate the contract for any reason before 5:00 PM on the last day of the option period. "As-is" does not eliminate the option period. The option period is a separate contractual right governed by a separate paragraph.

3. The buyer's right to negotiate repairs is preserved. After the inspection, the buyer can still submit a formal amendment to the contract requesting repairs, credits, or a price reduction. If you refuse the amendment, the buyer can terminate during the option period. "As-is" does not mean "no negotiation." It means the initial contract does not require you to make repairs. It does not prevent the buyer from asking later.

Why this matters for sellers

Many sellers receive an offer with 7D(1) checked and assume they will never hear about repairs. That is incorrect. The as-is designation means the buyer is not conditioning the contract on repairs at the time of signing. It does not mean the buyer will not inspect, find issues, and ask for concessions through an amendment during the option period.

The practical reality is this: almost every buyer conducts an inspection during the option period regardless of whether they checked 7D(1) or 7D(2). After the inspection, many buyers submit a repair amendment requesting fixes or credits. The fact that they checked "as-is" on the original contract does not prevent them from doing this. It simply means that if you decline their repair request, they can terminate during the option period, get their earnest money back, and you keep only the option fee.

What buyers actually do during the option period

Understanding the buyer's typical sequence during the option period helps you anticipate what is coming and prepare for it.

Day 1 to 3: Scheduling inspections

The buyer hires a general home inspector, typically within the first two days. The general inspection covers structure, foundation, roof, plumbing, electrical, HVAC, appliances, and safety concerns. Cost is usually $300 to $600 depending on the size of the home. The buyer may also schedule specialty inspections: a foundation engineer, a roof inspector, a pool inspector, a pest and termite inspector, or environmental testing.

Day 3 to 5: Receiving inspection reports

The inspector delivers a written report with photos documenting every finding. The buyer and their agent review the report and categorize issues into three buckets: deal-breakers (major structural or safety concerns that could cause the buyer to terminate), negotiation items (repairs or credits the buyer will request through an amendment), and accepted items (minor issues the buyer is willing to live with).

Day 5 to 7: Repair amendment or termination

If the buyer wants repairs or credits, they submit a formal amendment to the contract. This is where the actual negotiation happens. You can accept the amendment, counter with different terms, or reject it entirely. If you reject it and the option period has not expired, the buyer can terminate and walk away with their earnest money.

If the buyer finds nothing significant, they may simply let the option period expire without action, which means they are proceeding with the purchase under the original contract terms.

Seller strategy during the option period

The option period is the highest-risk window for sellers. Here is how to navigate it.

Before the option period starts

Complete your Seller's Disclosure Notice thoroughly and honestly before the contract is executed. Every known defect you disclose upfront is a defect the buyer cannot claim was hidden. If the buyer's inspector finds something you disclosed, it is not a surprise. If they find something you did not disclose and should have, you have a legal problem that extends well beyond the transaction.

During the inspection

Leave the property during the inspection. Do not follow the inspector around. Do not volunteer information about the property's history. Do not attempt to explain or minimize any issues. The inspector works for the buyer and will note everything they find regardless of what you say. Your presence creates pressure and can lead to statements that become negotiation leverage later.

When the repair amendment arrives

This is the moment where most sellers lose money. The buyer's agent writes a repair amendment requesting specific fixes or credits. Many sellers, especially first-time sellers, agree to everything without getting a single contractor estimate. The dollar amount in the repair amendment was written by the buyer's agent, not by a contractor. It may be reasonable. It may be inflated. You do not know until you get your own estimates.

Before responding to any repair amendment, get at least one contractor estimate for each requested repair. You have three options: agree to make the repairs yourself (using your own contractor, not the buyer's), offer a credit in lieu of repairs (often more efficient for both parties), or decline the request. For more on navigating these negotiations, see our guide on what happens when the appraisal comes in low. If you decline and the option period is still active, the buyer can terminate. If the option period has already expired, the buyer has less leverage because terminating after the option period means losing their earnest money.

The timing play

Pay attention to when the repair amendment arrives relative to the option period expiration. A repair request on Day 3 of a 7-day option period gives you time to evaluate and counter. A repair request on Day 6 of a 7-day option period creates urgency and pressure. Some buyers and their agents intentionally time repair requests near the end of the option period to reduce your response window. Be aware of this tactic.

Option period extensions

The buyer may request an extension of the option period. This is a separate negotiation that requires a written amendment to the contract and additional consideration (an additional option fee paid to you).

Under the TREC Amendment form, Paragraph 7 provides the language for extending the option period. The buyer pays an additional option fee for a new termination date. Texas case law indicates that the original option period actually ends and a new one begins rather than a true extension. The additional option fee must be delivered to the seller or listing broker promptly. Failure to timely deliver the additional fee may render the extension invalid.

As a seller, you are not required to agree to an extension. Agreeing to extend gives the buyer more time to find problems or to wait for additional inspection reports. Declining puts pressure on the buyer to make a decision with the information they have. The right choice depends on the specific circumstances of your transaction. If the buyer needs more time because a specialty inspection could not be scheduled within the original window, an extension may be reasonable. If the buyer is using the extension request to delay while shopping for other homes, it may not be.

What happens after the option period ends

Once the option period expires without the buyer delivering a written termination notice, the buyer loses their unrestricted right to terminate. They are now committed to the purchase under the contract terms.

This does not mean the buyer has zero exit paths. They may still have contingencies that allow termination for specific reasons: financing contingency failure (the lender does not approve the loan), title objections that cannot be resolved, or the seller's failure to meet a specific contract obligation. But the broad "I can walk away for any reason" right is gone.

After the option period, if the buyer terminates without a contractual basis, they forfeit their earnest money to you. The option fee was already nonrefundable from the start. This is why the option period is so significant. Before it expires, the buyer holds almost all the cards. After it expires, the balance shifts substantially toward the seller.

Frequently asked questions

How long is the typical option period in Texas?

Five to ten calendar days is the most common range. Seven days is frequently used for standard residential resale homes. Competitive offers may use 3 to 5 days to stand out. Luxury, older, or complex properties may warrant 10 to 14 days for thorough inspections.

Can the buyer terminate for any reason during the option period?

Yes. The buyer can terminate for any reason during the option period. They do not need to justify their decision. They could terminate because the inspection found a problem, because they changed their mind, because they found another property, or for no reason at all. The termination right is unrestricted. The only requirement is that written notice is delivered before 5:00 PM on the last day.

What happens if the buyer does not pay the option fee?

If the buyer does not pay the option fee, they do not have an option period. The termination right under Paragraph 23 only exists if the option fee is paid. Without it, the buyer is bound by the contract from the effective date and cannot terminate under the option period provision.

Does "as-is" mean I do not have to disclose problems?

No. The Seller's Disclosure Notice requirement under Texas Property Code Section 5.008 is completely separate from the as-is provision in Paragraph 7D. You must disclose all known material defects regardless of whether the contract says as-is. Failing to disclose known defects can result in legal liability including rescission of the sale, actual damages, and claims under the Texas Deceptive Trade Practices Act. "As-is" is a contract term about repairs. Disclosure is a legal obligation about honesty.

Can I refuse to let the buyer inspect during the option period?

No. Under Paragraph 7A of the TREC contract, you must allow the buyer and their inspectors access to the property at reasonable times. You must keep the utilities on during the entire contract period. The only exception is hydrostatic testing, which requires your written approval because it involves introducing water under the foundation.

What is a typical option fee in Texas?

For homes in the $250,000 to $500,000 range, option fees typically run from $100 to $500. In competitive markets or for higher-priced homes, $500 to $2,000 is not uncommon. There is no minimum or maximum set by law. The amount is negotiated between the buyer and seller. A higher option fee signals a more serious buyer because they have more nonrefundable money at risk.

How does Waymark help sellers during the option period?

Waymark's AI, Aria, tracks every deadline in the contract from the effective date, including the exact date and time the option period expires. Aria sends a 48-hour reminder before the option period deadline so you are never caught off guard. When a repair amendment arrives, Aria reads every line item and helps you evaluate the request before you respond. On the Manage plan ($1,199), a licensed broker reviews the repair amendment with you and advises on whether to accept, counter, or decline based on the specific terms and your position. All of this is included in Waymark's pricing with no listing commission at closing.

Selling your Texas home? Waymark gives you MLS exposure, AI-guided contract support through every deadline, and licensed broker help when negotiations get complicated. Start your listing at waymarkre.com.

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