The option period in Texas is a negotiated stretch of days — usually 5 to 10 — at the start of a contract during which the buyer can terminate for any reason and walk away with their earnest money. The buyer pays a separate, non-refundable option fee for that right. It ends at 5:00 PM local time on the last day, weekends included, and it is the single most important deadline in the first week of a Texas transaction.
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▼We coordinate hundreds of Texas closings a year, and the option period is the first date we calculate on every new file. Everything about the early transaction — inspections, repair amendments, termination rights — hangs on that one window.
Where the Option Period Lives in the TREC Contract
The termination option is Paragraph 5 of the TREC 1-4 Family Residential Contract (Resale), sharing space with earnest money. That’s not an accident — the two are delivered together and work together.
The parties negotiate two blanks: the option fee amount and the number of days. There’s no legal minimum or maximum for either. On the files we manage, 7 days and $200 are the most common combination, with 5-10 days and $100-$500 covering the vast majority of transactions.
The option period starts the day after the effective date — the date the last party signs or initials the final contract. Day 1 is the first full day after execution. Miscounting the start date is one of the most common option period mistakes we see, and it can put a termination notice a day late.
What Is an Option Fee?
The option fee is what the buyer pays the seller for the unrestricted right to terminate. In exchange for nominal consideration and the buyer’s agreement to pay the option fee on time, Paragraph 5B of the current contract, TREC 20-19, says “Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within _____ days after the Effective Date of this contract (Option Period).”
It’s a small number compared to the earnest money, and that’s the point. The buyer isn’t putting up a deposit. The buyer is buying time: a few days to inspect, get bids, and decide, with a guaranteed exit. The seller is paid for taking the house off the market while that happens.
The option fee isn’t mandatory. A buyer can write an offer with no option fee and no option period, and some cash and investor buyers do. Paragraph 5D is blunt about what that means: “If no dollar amount is stated as the option fee or if Buyer fails to deliver the option fee within the time required, Buyer shall not have the unrestricted right to terminate this contract under this paragraph 5.” No fee, no option.
How Much Is a Typical Option Fee in Texas?
No law or form sets the amount. The buyer and seller negotiate it, along with the number of days. What follows is what we see on files, not a rule:
- Most option fees land between $100 and $500. That range covers the large majority of resale files we coordinate.
- Per-day thinking is common. On a 7- to 10-day option period, we often see something like $25 to $50 per day, which puts the fee around $175 to $500.
- Competitive offers go higher. In multiple-offer situations, buyers sometimes offer a bigger option fee to stand out. We’ve seen fees in the thousands, but that’s unusual.
A larger option fee is money the seller keeps if the buyer walks, so listing agents sometimes weigh it alongside price when comparing offers. A short option period with a meaningful fee can be worth more to a seller than a slightly higher price with a long, cheap one. That’s a conversation for the listing agent and the seller.
Who the Option Fee Is Paid To, and When
Under Paragraph 5A of TREC 20-19, the buyer delivers both the earnest money and the option fee to the escrow agent, usually the title company, within 3 days after the effective date. From the form: “The earnest money and option fee shall be made payable to Escrow Agent and may be paid separately or combined in a single payment.”
A few details from Paragraph 5A that come up on real files:
- Weekend and holiday extension. If the last day to deliver falls on a Saturday, Sunday or legal holiday, the deadline moves to the end of the next day that isn’t one (5A(2)). This applies to delivering the money. It does not apply to the end of the option period.
- One check, applied in order. If the buyer sends a single payment, the escrow agent applies it first to the option fee, then to the earnest money, then to any additional earnest money (5A(3)). A short payment shorts the earnest money, not the option fee.
- Release to the seller. The buyer authorizes the escrow agent to release the option fee to the seller “at any time without further notice to or consent from Buyer” (5A(4)). In practice, some sellers take it right away and some leave it with title until closing.
Older articles still say the buyer pays the option fee directly to the seller. That isn’t how the current form works. It goes to the escrow agent.
Is the Option Fee Credited at Closing?
Yes. Paragraph 5A(4) says it plainly: “The option fee will be credited to the Sales Price at closing.” If the deal closes, the buyer gets credit for it. If the buyer terminates during the option period, Paragraph 5B says the option fee is not refunded, and the escrow agent releases whatever option fee it still holds to the seller.
Option Fee vs. Earnest Money: Two Payments, Two Jobs
These get confused constantly, including by experienced agents. Here’s the current breakdown under the TREC contract:
| Option Fee | Earnest Money | |
|---|---|---|
| Typical amount | $100-$500 | 1% of purchase price |
| Delivered to | Escrow agent (title company), with the earnest money | Escrow agent (title company) |
| Deadline | Within 3 days after the effective date | Within 3 days after the effective date |
| Refundable? | No — seller keeps it either way | Yes, if buyer terminates during the option period |
| If the deal closes | Credited to the sales price | Credited to the buyer at closing |
One detail worth calling out: since the 2021 contract revisions, the option fee is delivered to the escrow agent along with the earnest money — one payment stop, one deadline. Older articles and older habits still say “pay the option fee directly to the seller,” and that’s no longer how the form works. The title company receipts both. The escrow agent can release the option fee to the seller at any time, and it’s credited to the sales price at closing.
If the buyer fails to deliver the option fee within the 3-day window, the consequence is severe: no unrestricted right to terminate. The buyer is still under contract, but the escape hatch never opened. This is why we confirm receipt of both payments with the title company on day 1 or 2 of every file — not day 3.
Late earnest money is a different problem with a different remedy. Under Paragraph 5C, if the buyer doesn’t deliver the earnest money on time, the seller may terminate or use the Paragraph 15 remedies, but only by giving notice before the buyer delivers it. Once the money lands at title, that window closes. Whether to act on it is a decision for the listing agent, the broker and the seller, and a real estate attorney if it’s contested.
When the Deal Falls Apart
The two payments go different directions when a contract ends:
- Buyer terminates during the option period. The seller keeps the option fee. The earnest money goes back to the buyer under Paragraph 5B. This is the cleanest exit there is.
- Buyer terminates later under another right. Financing, title, or a property-specific addendum. The option fee is still the seller’s. The earnest money typically goes back to the buyer if the termination fits the contract.
- Buyer walks with no contractual right. The option fee is still the seller’s, and the earnest money is where disputes start.
In every one of these, the earnest money doesn’t move on its own. The parties sign a release, or one of them makes a written demand on the escrow agent. We cover that process in Release of Earnest Money in Texas. Who’s entitled to the money in a contested file is a legal question for a real estate attorney.
The 5:00 PM Rule
The option period ends at 5:00 PM local time where the property is located on the last day of the period. Not midnight. Not close of business. 5:00 PM.
Weekends and holidays count. If day 7 of a 7-day option period lands on a Sunday, the option period ends Sunday at 5:00 PM. The extension-to-next-business-day rule that applies to delivering the option fee and earnest money does not apply to the option period’s end.
What Happens During the Option Period
This window exists so the buyer can do their homework with a guaranteed exit. On a typical file:
- Days 1-3 — inspections get scheduled and completed. General inspection first, then any specialists (foundation, HVAC, pool) the general inspector flags.
- Days 3-5 — the buyer’s agent reviews findings with the buyer and, if the buyer wants repairs or concessions, negotiates an amendment with the listing agent.
- Final days — either an amendment gets signed, the buyer proceeds as-is, or a termination notice is delivered.
Repair negotiations happen through the agents via a TREC amendment. From the coordination side, we track whether an amendment is being negotiated as the deadline approaches — because an unsigned amendment at 4:45 PM on the last day forces a decision: terminate, extend, or proceed without it.
Extensions are common and simple. The parties can amend the contract to extend the option period, usually for an additional fee. What matters is that the amendment is fully executed before the current option period expires. An extension signed after expiration is extending a right that no longer exists.
After the Option Period Expires
At 5:01 PM on the last day, the buyer’s position changes completely. The earnest money goes from freely refundable to at-risk. The buyer can still terminate under specific contractual rights — the financing contingency, title objections, seller default — but the “any reason at all” window is closed.
For sellers, option period expiration is the milestone that means the deal is likely real. Showings stop mattering, backup offers get less attention, and everyone shifts focus to the closing process.
How Long Should the Option Period Be?
The number of days is negotiated and written into Paragraph 5B. Here’s how it tends to break down on the files we see:
- 3 to 5 days. Tight. Shows up on competitive offers and with investors and cash buyers. There’s barely time for a general inspection and one specialist.
- 7 to 10 days. The norm for most resale files. Enough time for inspections, reports and a repair amendment.
- More than 10 days. Reasonable for older homes, acreage, or properties with known issues that need specialists. Longer periods usually come with a larger option fee.
- No option period. Rare in resale. The buyer gives up the unrestricted exit entirely.
Shorter generally favors the seller, longer favors the buyer. How to structure it is between the agent and the client.
Details That Trip Up Option Periods
The 5:00 PM cutoff is firm. Email goes down and signatures get stuck. A notice delivered at 5:01 PM on the last day is late.
The option fee has to actually arrive. Signing the contract doesn’t create the option period. Delivering the fee to title within 3 days does.
The end date is exact. Off by one day, either side can think the buyer still has an exit when they don’t, or the reverse.
An extension is a new agreement. The seller doesn’t have to agree to one. In our experience, when they do, it usually comes with an additional option fee.
A termination doesn’t free up the earnest money by itself. The release still has to be signed. See Release of Earnest Money in Texas.
Who Tracks All of This?
On a busy agent’s desk, the option period is one deadline among dozens — and it’s the one with a hard 5:00 PM cutoff and real money attached. This is exactly the kind of date a transaction coordinator exists to track. We calculate it on day one, confirm the option fee and earnest money were receipted, watch the amendment traffic as expiration approaches, and make sure nothing about that deadline sneaks up on anyone.
We don’t advise buyers whether to terminate, and we don’t negotiate repairs — that’s the agent’s job and a licensed activity. We make sure the dates are right, the deliveries happened, and the paperwork is complete. If that would take a weight off your files, our contract-to-close service covers it, and our free Contract to Close Checklist shows every deadline we track.
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Related Articles
- Earnest Money in Texas — How the deposit works under the TREC contract
- Release of Earnest Money in Texas — How the deposit moves when a deal ends
- TREC 1-4 Family: Effective Date — The date every option period calculation starts from
- Texas Real Estate Closing Process — What happens from contract to keys
- What Happens When You Miss a Contract Deadline — The consequences, deadline by deadline
