The Texas option period, from the seller's side
The option period is a window where the buyer can cancel the contract for any reason at all and get their earnest money back. They pay an option fee for that right. On the current TREC contract it lives in Paragraph 5, not Paragraph 23, and notice has to be given by 5:00 p.m.
This explains how home selling works in Texas. It is not legal advice and it is not tax advice. Kyle is a Realtor. For advice about your own situation, talk to an attorney or a tax professional.
Start with the thing almost every article on this topic currently gets wrong.
It is not paragraph 23 anymore
TREC replaced the contract. Form 20-19 took effect on July 1, 2026 and it replaced form 20-18, which had been in use since late 2024.
One of the changes was structural. The termination option used to sit by itself down in Paragraph 23. It has been merged into Paragraph 5, which is now titled “Earnest Money and Termination Option,” and it sits next to the earnest money rules because the two are delivered together. Paragraph 23 is now “Consult an Attorney Before Signing.”
That matters for a practical reason and not just a pedantic one. If you are reading advice that says “paragraph 23,” that advice was written against a form nobody is signing anymore, and you have no way to know what else in it is stale.
What the option period actually is
You, the seller, are selling the buyer a short window of freedom. That is genuinely what is happening.
Most buyers use it for inspections, and that is what it exists for in practice. But nothing in the contract requires an inspection or requires them to give you a reason. They can walk because they found a house they like better.
If they do terminate in time, the option fee stays with you and their earnest money goes back to them. That is the whole trade.
Two things about the fee people get wrong
The option fee is credited at closing. If the deal closes, the buyer’s option fee comes off the sales price. So it is not really a payment to you in that case, it is a deposit against the purchase. It only becomes money you keep if they walk.
You can be paid the fee before the option period ends. Under Paragraph 5A(4), the buyer authorizes the escrow agent to release the option fee to you at any time, without notice to them and without their consent, and releases the escrow agent from liability for doing it. It is your money from the moment it is delivered.
The delivery rules, and the one rollover that exists
Buyer's clock
Earnest money and option fee due
3 days after the Effective Date
This deadline, and only this one, rolls forward when it lands on a Saturday, Sunday or legal holiday.
That rollover is narrower than most people assume. Paragraph 5A(2) points at Texas Government Code sections 662.003(a) and 662.003(b)(4) and (6). Add those up and eleven days count:
New Year’s Day, Martin Luther King, Jr., Day, Presidents’ Day, Memorial Day, Emancipation Day in Texas on June 19, Independence Day, Labor Day, Veterans Day, Thanksgiving Day, the Friday after Thanksgiving, and Christmas Day.
Here is the part that trips people. Texas has other state holidays, and the contract deliberately leaves them out. Christmas Eve and December 26 are Texas state holidays that do not roll this deadline. Neither do Texas Independence Day, San Jacinto Day, or Lyndon Baines Johnson Day. Good Friday does not either, because the statute treats it as an optional holiday and the contract does not reference that subsection at all.
So a deadline landing on Christmas Day moves. A deadline landing on Christmas Eve does not, even though half the county is closed.
If you want your own dates worked out, the contract deadline calculator does this from your effective date, using the correct eleven days.
The 5:00 p.m. rule
Notice of termination has to be given by 5:00 p.m. local time where the property is located, on the last day. Not midnight, and not “sometime that day.”
And this deadline has no rollover. Paragraph 5A(2) covers the earnest money, the option fee and any additional earnest money. It says nothing about the notice in 5B. If the last day of the option period is a Sunday, it is still Sunday at 5:00 p.m.
Paragraph 5E closes the whole section with the line that time is of the essence and strict compliance with the time for performance is required. That is contract language for “these are not soft dates.”
Buyers usually terminate using TREC form 38-8, the Notice of Buyer’s Termination of Contract. Notice has to be in writing under Paragraph 21, and it is effective when hand-delivered, mailed, sent by overnight courier, or transmitted electronically to you or your agent.
The thing that voids the whole right
I would check this on day four of every contract. Not to catch anybody out, just so you know where you actually stand. Ask your agent to confirm with the title company that both the option fee and the earnest money were received and when.
If the earnest money is the piece that did not arrive, that is a different and stronger position for you.
What you can actually negotiate
You are not stuck with whatever gets written in those blanks. Both numbers are negotiable and they are worth negotiating.
The length. Every day of option period is a day your house is off the market with no commitment on the other side. Seven days is common around here. Ten is common on older homes where the buyer wants more inspection time. If you have multiple offers, a shorter option period is worth real money to you, sometimes more than a slightly higher price.
The fee. A higher option fee means the buyer has more to lose by walking. It is not a huge number in most transactions, but it does change behavior, and it is yours to keep if they leave.
Think about the two together. A five day option at a higher fee and a ten day option at a low fee are very different amounts of risk for you, even at the same sales price.
If this happens: the buyer terminates on the last day, at 4:55 p.m.
What is actually true
If they gave proper notice within the time, that is simply their right and it does not matter that it was late in the window. You keep the option fee. Their earnest money goes back to them.
Your options
What I would do
Sign the earnest money release quickly. It is their money and holding it up creates a fight you will not win, and Paragraph 18D can put you on the hook for damages and fees for refusing without cause. Then find out what the inspection said. If it is something real, you now know about it before the next buyer's inspector does, and you have to disclose it anyway.
If this happens: you want to accept a better offer while the first buyer is still in their option period
What is actually true
You cannot just take the better one. You are under contract. The first buyer holds the option, not you. What you can do is line up the second offer properly and wait.
Your options
What I would do
Use the back-up addendum. Paragraph 19 of the contract expressly lets you keep showing the house and keep taking back-up offers unless you agreed otherwise in writing. That costs you nothing, keeps the better buyer engaged, and means a termination does not put you back at zero.
The short version
The option period is the buyer’s, not yours. It is the single biggest reason the contract is lopsided in the first days after you accept, which is the married and dating problem I lay out in the main guide.
You cannot remove it in most transactions and you would struggle to find buyers if you tried. What you can do is negotiate its length like it matters, price the fee so walking away is not free, confirm the money actually arrived, and keep taking back-up offers the entire time.
Frequently asked questions
No. TREC form 20-19 took effect July 1, 2026 and merged the termination option into Paragraph 5, alongside earnest money. Paragraph 23 is now 'Consult an Attorney Before Signing.' Any article or agent still saying paragraph 23 is describing form 20-18, which is no longer the promulgated form.
No. The option period is a right the seller grants to the buyer. It gives the seller nothing. A seller can only terminate for cause, such as the buyer failing to deliver earnest money on time, or the buyer defaulting.
Yes. If the buyer terminates during the option period, the option fee is not refunded and the escrow agent releases any of it still being held to the seller. If the sale closes instead, the option fee is credited against the sales price, so the buyer effectively gets it back at closing.
5:00 p.m. local time where the property is located, on the last day of the option period. Not midnight. Unlike the earnest money deadline, the option period end has no weekend or holiday rollover written into the contract.
Under Paragraph 5D, if no dollar amount was stated as the option fee, or the buyer failed to deliver it within the time required, the buyer does not have the unrestricted right to terminate. They never bought that right. This is worth checking on day four.
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