What is the option period in Texas and how does it work?

The option period is a number of days that the buyer and seller agree to in the contract. During those days, you can terminate the purchase for any reason and recover your earnest money. You are buying that right with a payment the seller keeps.

If you are buying your first home in Texas, this explains what happens in the order it happens.

What this article answers

• What is the option period when you buy a home?
• How are the days of the option period counted?
• How long is the option period, and what time does it end?
• Is the option fee refundable?
• What happens if I terminate the contract during the option period?
• What happens when the option period ends?

The short answer

• You deliver the option fee and the earnest money to the title company within the 3 days after the contract’s effective date.
• The option period starts the day after the effective date and ends at 5:00 p.m. on its last day, local time where the house is located.

What is the option period when you buy a home?

The option period is a right the seller gives the buyer in the purchase contract. During the number of days they agree to, the buyer can terminate the contract without giving the seller a reason.

The buyer and seller write the number of days and the option fee into the contract. If the contract does not state an amount for the option fee, the buyer does not have that right.

Without an option period, once the contract is signed, you could terminate it only for the reasons the contract provides. With an option period, you have time to inspect the house and make your decision calmly, and that is why I recommend including it in the contract.

How are the days of the option period counted?

Day 1 of the option period is the day after the contract’s effective date. You count every calendar day, including Saturdays, Sundays, and holidays. If the last day falls on a Saturday, Sunday, or holiday, the option period ends that same day and does not move to the next day.

Contracts have something called the effective date. The dates and contract deadlines start counting from that date. That is what we mean when we say the clock starts running. It does not start on the day you saw the house, the day of the inspection, or the day you sent the offer.

The effective date is the day the last person to sign notifies the other party, or the other party’s agent, that they signed the contract.

For example, if your contract’s effective date is March 3 and you and the seller agreed to 7 days of option period, Day 1 is March 4 and the last day is March 10.

How long is the option period, and what time does it end?

The option period lasts for the number of days you and the seller write into the contract, so each purchase has its own period.

If you and the seller want to extend it, both of you sign an amendment before it ends, with the new last day and a new payment that you deliver directly to the seller.

The last day of the option period ends at 5:00 p.m., local time where the house is located. If you decide to terminate the contract, your written notice has to reach the seller or the seller’s agent before that time.

Is the option fee refundable?

No. The seller keeps the option fee because what you paid for was the right to terminate the contract, whether you use it or not.

If the purchase reaches closing, the title company counts the option fee as part of what you pay for the house. If it does not, you did not lose the money. You paid for the possibility of terminating the contract. You are paying for freedom, and you are paying for options.

If the third day to deliver it to the title company falls on a Saturday, Sunday, or holiday, that deadline moves to the next day that is not a Saturday, Sunday, or holiday. If the option fee does not reach the title company within that deadline, the contract says the buyer loses the right to terminate the contract without giving a reason.

What happens if I terminate the contract during the option period?

If, before the option period ends, you give the seller or the seller’s agent written notice that you are terminating the contract, the contract terminates. The title company may first ask you and the seller to sign a document releasing the title company from responsibility, called a release, and then the earnest money is returned to you.

During those days, you arrange the inspections of the house. Even if you agreed to buy the house in its current condition, or as is, the contract still allows you to inspect it, negotiate repairs with the seller, and terminate the contract during the option period. My guide to types of inspections explains what each inspection reviews.

What happens when the option period ends?

When 5:00 p.m. passes on the last day without you notifying the seller that you are terminating the contract, your right to terminate it for any reason ends, and the purchase moves to the next stage, through closing. What the inspector finds, by itself, no longer allows you to terminate the contract.

You may still be able to terminate the contract for the reasons your contract provides, and each one has different requirements.

• If you and the seller checked the box in the financing addendum that makes the purchase depend on the lender approving you, called Buyer Approval, you can terminate the contract if the lender does not approve you, within the days written in that addendum.
• That same addendum also lets you terminate the contract up to the third day before closing if the lender does not approve the house because of the appraisal, insurance, or required repairs.
• In those two cases, you deliver to the seller your written notice that you are terminating the contract and a copy of the lender’s letter explaining why the lender did not approve the loan or the house, and your earnest money is returned.

Other addenda you signed, such as the appraisal addendum, and the contract deadlines for title and the survey may also give you another way to terminate the contract. Outside the reasons your contract provides, the seller may keep your earnest money.

From real life

People have a hard time understanding the option period. A client wrote to ask me what happened when the option period ended, and I answered: "It depends: if everything goes well, there are no more negotiations and we move to the next stage." I explained that those days were the time they bought so they could terminate the contract without penalties.

Every client has a different situation, so one transaction cannot explain what happens in every purchase. The option period is something you review in each contract, and it also depends on the condition of the house.

Sometimes the period is too short, and you and the seller need to extend it because the negotiations are not finished. In Texas, you have a general inspection, and I would also recommend a termite inspection, which the same general inspector can often perform for an additional cost. You can also choose other inspections depending on the house, such as a roof inspection or a foundation inspection.

That is why what you know about the house and what you find during the inspections affect how much time you need. I recommend a minimum of seven days so the buyer has room to review the house, complete additional inspections, and make a decision without running out of time. From the buyer’s point of view, I believe the option period is worth it.

From the seller’s point of view, the option period is also a risk. While the buyer has that right, the house can remain under contract without the seller knowing for certain whether the purchase will reach closing. In recent transactions, I have seen some sellers ask for a higher option fee, and that is also part of the terms the buyer and seller negotiate in the contract.

If the house you like already has a contract signed with another buyer, the option period starts at a different time. I explain that in the article about backup offers.

The decision to continue with the purchase is yours. For your specific situation, you can talk it through with me. If you are considering making an offer, you can write to me and we can review the dates in your contract together. My work with buyers is explained here.

Lliliam Foster is a bilingual REALTOR® with Compass serving Spring, The Woodlands, Conroe, Magnolia, Tomball, Cypress, Humble/Atascocita, North Houston/Aldine and the FM 1960 corridor. Information current as of October 2026.

Lliliam Foster, REALTOR® — Compass. This information is general in nature and does not constitute legal or financial advice. Compass is a real estate brokerage licensed in Texas.