August’s Closing Tip is all about the Option Fee.
Paragraph 23 of the One to Four Family Residential Resale Contract starts,
“For nominal consideration, the receipt of which is hereby acknowledged by Seller …Seller grants to Buyer the unrestricted right to terminate this contract…” It also states “…if Buyer fails to pay the Option Fee to Seller within the time prescribed, this paragraph will not be a part of this contract and Buyer shall not have the unrestricted right to terminate this contract.”
Finally, the paragraph ends with, “Time is of the essence for this paragraph and strict compliance with the time for performance is required.”
It is critical that the option money is given to the Seller (not to the title company) or risk the Buyer losing the right to terminate under this paragraph.
The title company should never be the holder of the Option Fee nor should the title company determine if and when the terms of termination are met.