Settling the dispute of what happens to option money on a backup contract.

Everyone understands that you have to sign an addendum to have a true backup contract in Texas. However, there seem to be a lot of questions about what happens with the option money.

For a true backup offer, you need a fully executed contract with earnest money. If you’re asking for an option period, you also need option money to go to the title company. If the buyer has the unrestricted right to terminate the backup contract, the termination period begins on the effective date of the backup contract. It continues after the amended effective date, then expires after the period is over.

If you give a backup offer as a buyer’s agent, you need to inform your buyer that option money doesn’t work like earnest money. Those funds are gone even if you decide to withdraw. You have a fully executed contract, so you can’t just leave; you must terminate.

If you have any questions, give us a call at (210) 324-7469. We look forward to hearing from you.