This blog post will give you an overview of what does active option mean on Realtor.com and how it affects you when you are searching for homes.
A Real Estate Agent is someone who makes the world of real estate their job. They negotiate contracts, collect money, buy/sell properties, and they do it all in the name of the people they represent.
A real estate agent is someone who can be your advocate in the real estate world, depending on what you’re looking for.
When you’re looking for a new home, it’s important to know the terminology.
If this sounds like something you have come across, then read on!
This post goes on to explain what active options are and when you read to the end you will have better knowledge of what this means to you as a buyer.
What is an Active Option Contract
An option contract is a contract between two parties, where one party has the right but not the obligation to buy or sell an asset or instrument at a predetermined price on or before a predetermined date.
The buyer of an option has the right to buy, but not the obligation if they relay their option not to buy the property.
During this period the seller has agreed to sell the property to the current buyer and will not accept another offer during this period.
Active Option is used when you (the Buyer) is interested in buying the Seller’s Property but you are not necessarily obligated to buy it due to having an Active Option period.
This allows you to terminate the contract if for some reason you determine that the property does not meet all of your qualifications or criteria on the property.
It allows you for a sum of consideration to take the home off the market but gives you the first right to buy the property if you feel that the property meets your expectations.
When you are in an Active Option Contract sometimes this can be considered a Unilateral Contract during this period because you have some consideration to buy the property but you are not obligated to purchase the property.
So, how do you get an Active Option Contract? You simply just ask your Agent to add this under page 2 5(A) (B).
This will be on a TREC Contract Agreement in Texas. It will vary in a different states.
This can only be made possible when you have your Realtor add in the number of days under the Option Period in the TREC Contract Agreement 5(B).
You must make sure that the Option money is given to the Seller within the required timeframe.
In the State of Texas, this time frame is normally three days from the acceptance date of your offer.
If you do not send in the required amount to the title company within the required time the Option Period becomes null and voided and you no longer have an option period. (Please read that sentence again.)
It’s important to get the Option Amount to the Sellers and get a copy receipt stating that the title company or seller has received the Option amount.
As more and more people are realizing the benefits of Active Option, it is becoming increasingly popular in the Real Estate world.
This does give an advantage to someone who is buying because you can put an Active Option on a property and still have the ability to walk away if for some reason you no longer want to buy the home.
An active option contract does give an advantage to the buyer because it allows the buyer to tie the property up without necessarily having full obligation to buy the home.
A buyer will typically make an offer with an Option Period, which gives the buyer time to do their inspection before they decide to purchase a property.
This can be a mutually beneficial agreement for both parties because a lot of buyers want to do their due diligence before they say yes and sellers want necessarily have their property tied up for a long period of time.
How To Negotiate Active Options Contracts in Real Estate
Normally, an Active Option Contract is usually negotiated when you make an offer on a Real Estate Property.
Typically you will call up your Real Estate Agent and let your Real Estate Agent know that you want to make an offer on the property.
You will also let the Real Estate Agent know that you want to add an option period to your offer. Here are a few things to keep in mind.
1. If you are in a bidding war it’s a good chance that some of the other buyers are not giving the owner more option money.
You can simply tell your agent that you want to give the seller more option money. This can typically help your offer look better than some of the other bids.
Remember, this is money that will go to the seller and you can make sure that it is credited on your side.
You will not get this money back if you decide not to buy the home. So make sure that you know that you will not relay the Option to Terminate based on the Option Period.
2. The Option Money must be turned in within the timeframe or you do not have an Option on the property.
3. Make sure that you negotiate how long you want this period to be.
Typically the average period seems to be around 5 to 10 days.
But sometimes you might get a seller who will agree to a longer period. Remember it’s all negotiable!
When the owner accepts your offer along with the Option you now have an Active Option Period.
It is important to be proactive about all aspects of your home inspection.
You want to notify contractors of what you need to have repaired so that they can give you quotes on how much everything costs.
This will allow you to see what various repairs cost so that you can plan accordingly and make a decision on whether you want to buy the property, or relay your option to terminate the contract.
What is the difference between Active Option vs Pending Status in Real Estate?
So you want to know what is the difference between Active Option and Pending.
Active Option again is when you currently have the option to buy the property from the seller but you do not have the full obligation to buy it.
This only happens when you put in the Real Estate Contract an amount of time in the option period field.
For example, if you put in the Option Period Field of the TREC agreement 7 days. You are asking the sellers for a 7-day Option on their property.
If for some reason within 7 days you don’t want the house you can Terminate the agreement.
It means that the seller has agreed to allow you the option to buy their property. But, they are giving you a period of time to determine whether or not you want to buy it.
Once the seller accepts your offer to buy the property with an Option Period the Listing Agent will change the status in their local MLS to Active Option.
It lets the public know that the owner has an accepted offer with an option period.
When an offer is pending it means two things:
The Seller has accepted a buyer’s offer and the buyer is now obligated to fulfill their contractual duties to purchase the property.
There is no longer an Active Option on the property. So the buyer has accepted the property’s condition and the property is now moving towards closing.
When this happens, the Listing Agent will go into the MLS and change the property status to pending status.
This means that the property has met the buyer’s expectations and the buyer is now working on getting the loan.
Can you still make an offer when the home is in Active Option?
Is the home in active option status? Then, the seller is under no obligation to review your offer. The seller can only accept one offer at a time.
Normally, when the seller has an Active Option it means that they have decided to accept the current buyers offer on their property.
So what does this means to me if I want to make an offer on the home?
It means that the Seller isn’t obligated to look at your offer.
However, you can ask your agent to make a backup offer on the property.
The way this is done is simply to let your Realtor know that you are interested in putting a backup offer on the property.
Your Realtor will fill out your offer and will add the necessary backup offer addendum.
Now what happens is if for some reason the current buyer decides to relay their option to terminate the contract.
Your offer is now in a backup position. It would be the first offer the seller will look at and this gives you a better chance at getting an acceptable offer in the Active Option period.
But, remember the seller isn’t obligated to review your offer. This will happen if for some reason the current buyer decides to terminate their contract using the Option clause.
Conclusion
It can be hard sometimes trying to understand the language and terms in a Real Estate transaction.
We hope that you have a better understanding of what an Active Option is in real estate.
We went over a few things about how to negotiate an Active Option and whether or not you can still make and offer when the property is in Active Option status.
Let me know if this article has helped you with your future purchase!
And if you need help buying a home remember to pick up the phone and dial my number. I’m just one phone call away!
If you have found this article helpful please feel free to share it with your family, friends, and coworkers.