When Does the Option Period Start in Real Estate?

The option period in real estate transactions provides a defined timeframe for a buyer to conduct thorough due diligence on a property. This allows the buyer to assess the property’s condition and suitability, offering a limited window to terminate the purchase agreement without significant financial repercussions. It ensures buyers make an informed decision before fully committing to the acquisition.

Defining the Start Date

The option period begins on the “effective date” of the real estate contract. This effective date is when the contract becomes legally binding and enforceable for all involved parties. It is not merely the date of the first signature, but when the final party signs the agreement and their acceptance is communicated to the other side.

This communication can occur through various means, such as email or physical document delivery. For instance, if a buyer signs one day, the seller signs the next, and the fully signed contract is delivered to the buyer’s agent on a third day, that third day marks the effective date. The contract may also specify the effective date is tied to another event, such as the delivery of the option fee or earnest money into escrow. This date triggers the commencement of all time-sensitive obligations within the contract, including the option period.

Counting the Days

Once the effective date is established, the option period’s duration begins. The effective date itself is considered “day zero” for counting. The first day of the option period is the day immediately following the effective date.

The duration is measured in calendar days, meaning weekends and holidays are included in the count. For example, a 10-day option period starting after an effective date of November 1st would conclude on November 11th. The termination right expires at a specific time, 5:00 PM local time where the property is located, on the final day of the negotiated period.

Activities During the Period

During the option period, the buyer undertakes various activities to evaluate the property and their commitment to the purchase. A primary activity involves arranging professional home inspections, including structural assessments, HVAC, plumbing, electrical, pest, or foundation concerns. This comprehensive review aims to uncover any material defects or conditions that might affect the property’s value or the buyer’s enjoyment.

Buyers also use this time to obtain an appraisal to confirm the property’s market value, finalize financing arrangements, and review seller disclosures or other relevant documents. The option period grants the buyer the unrestricted right to terminate the contract for any reason, or no reason, without forfeiting their earnest money deposit. This flexibility allows for negotiation of repairs or credits with the seller based on inspection findings, or the ability to withdraw from the contract if concerns remain unresolved.

After the Period Ends

Upon the expiration of the option period, if the buyer has not issued a notice of termination, the contract moves forward. The buyer loses the ability to terminate the contract based on due diligence findings without risking their earnest money deposit. This deposit, often a significant sum, becomes vulnerable if the buyer defaults on the contract after this protective period has passed.

The option fee, a separate payment made by the buyer to the seller for the right to the option period, is non-refundable regardless of whether the buyer proceeds with the purchase. However, if the transaction successfully closes, this fee is credited back to the buyer at settlement. With the option period concluded, the transaction progresses toward closing, assuming all other contractual contingencies, such as financing or appraisal, are met.