What buyers need to know about option periods, relo addendums
When people relocate to Houston from out-of-state, one of the aspects of the Texas residential resale contract that they are typically unfamiliar with, is the termination option, or option period, as it is commonly known.
Simply put, the option period allows the buyer to pay a fee to the seller, for the unrestricted right to terminate the contract for any reason, within a specified time period.
This is a great benefit for the buyer, because it gives them time to have inspections performed on the property and evaluate the condition of the home.
If the buyer decides to terminate the contract before the end of the option period, they only forfeit the option fee, as their earnest money would be returned to them.
Where things tend to get a little complicated, is when the buyer is interested in purchasing a home that is being sold through a relocation management company (RMC). When that is the case, a relocation addendum, which typically does away with the option period, will be made part of the contract. But, it still gives the buyer the right to inspect and designate repairs within a set timeframe.
Bonnie Cameron, a corporate procurement specialist with Aires, an RMC with offices in Houston. said the relocation addendum is provided to the buyer along with a fairly dense amount of paperwork, which is necessary for a relocation home sale.
“The relocation addendum is put there in order to give the buyer as much information as possible about the home. The buyer will also receive all of the disclosures completed by the current owner of the home, and the ones signed by Aires, because we will be purchasing that home. We also give them all of the inspection reports, because again, we want them to have everything we know about the home,” Cameron said.
She said the relocation addendum is designed to disclose to the buyer that the RMC has or will acquire the home as part of a relocation transaction, and will then sell the home to the buyer in order to be in compliant with IRS guidelines.
“We want them to know that everything has to be in writing, and that the listing agent will be subsequently representing Aires as the seller,” Cameron said. “We want to make sure that there isn’t anything upfront that is going to hinder the sale for the buyer. So, for instance, we ask them to provide a financing prequalification letter, and we get the title work done upfront. This is why we specify that we have to use our title company.”
She added that buying a relocation listing can be a benefit for the home buyer, because there is so much information that is known about the property, and that there typically won’t be any surprises when the buyer has their inspections done.
“In most cases, the transferee who sells to Aires is required to remedy anything found on our inspections. If the inspector finds anything suspicious, we will get additional inspections. So, by the time a buyer makes an offer on the home, it has already been well inspected, and anything we know of that is a problem with the home, and any potential defect would have been corrected,” Cameron said.
Lynn Scott is the relocation director for Greenwood Kind Properties. She echoed Cameron’s sentiment about the benefits to a buyer when purchasing a home that will be sold as a relocation transaction.
“The buyer really will know more about the house than they would with a traditional seller, because of the relocation addendum, which explains everything, and all of the additional paperwork, and copies of the inspection reports and disclosures,” Scott said.
But, she said that it is important to point out that the relocation addendum doesn’t provide the unrestricted right to terminate for any reason. This is meant to discourage buyers who are not seriously interested in the property.
“RMCs don’t want buyers to write a contract on a property if they aren’t prepared to move forward with the purchase,” Scott said. “The relocation addendum usually covers a lot of things that are different about a relocation sale, and that helps protect the buyer.
“Most of our agents like relocation properties for their buyers, because they are generally treated well, the properties look great, RMCs spend the money when they need to, or they are offer credits. So, it’s usually a win-win all the way around.”
This is because, the RMC generally has a vested interest in having a contract come to fruition, so they are not interested in hindering the home sale when they have a serious buyer for the property.