Often when I’m out with buyers who have found a home they want to buy, they turn to me and ask, “What do we do now?”
The first thing I do when this happens is study the comps to make sure that our offer is backed up by actual numbers and that the price presented to us by the listing agent is, in fact, in line with the home’s actual market value.
Once we come up with a price, we’ll then proceed to make an offer. On page 167 of my book, “How to Buy a House in Houston, TX,” I include examples of the offer documents that we use. Written up by the Texas Real Estate Commission, these contracts are standardized, promulgated forms that we download and fill in as we solidify our offer. Remember that it is incredibly important to fill out these forms correctly.
Here’s an overview of what you’ll find on these documents:
At the top of the form, there’s a section where you’ll fill in the names of each party (the buyers and the sellers).
Following that, there’s a space for you to fill in how much you’re offering to the seller in terms of the sales price, as well as how much of a down payment you’re putting down. You might think that you’ll need to put down 20%, but sometimes you’ll find that you only need to put down 5% or 10%; as long as your lender is OK with it, that number can change at any moment.
Next, you’ll state how much you’ll put in for an earnest money deposit. For those unfamiliar, an earnest money deposit is basically a promise to the seller that you, as the buyer, are serious about making the purchase. The amount is normally 1% of the asking price. Once the contract is signed by both parties, the buyer must deliver this deposit to the title company, which can be selected by the buyer or the seller. For homes that aren’t new construction, the seller typically pays for the title policy.
The next important part of an offer to pay close attention to is the closing date, which is the date on which the sale will actually happen. Typically a contract can be closed between 30 and 45 days.
Beyond that, there are sections in which the following information can be filled in:
- Any special provisions you may want to address with respect to the house
- Any settlements and expenses. For example, are you asking for closing cost contributions?
- Any addendums that we plan to include in the contract
Finally, on page 8 of this form, you’ll find the “termination option” section. Many people have asked me what it means for a home to be ‘option pending’—this just means that the property has an accepted offer on the table. Once we have an accepted offer on the table and the contract has been both signed and executed, that’s when the option period begins.
During the option period, you have 10 days to do your due diligence. This is the time to schedule an inspector to come view the property, talk to your neighbors about the neighborhood, or to talk to the City of Houston if you have particular questions about the home. You’ll also want to take this time to get quotes for home insurance to ensure that there are policies available that fit in your budget.
Further still, if you develop cold feet about the property or find a different property that you like more, the option period is the time to terminate the contract. If you terminate the contract during this period, you will get your earnest money deposit back, but you won’t get the $100 to $500 option fee back.
Hopefully this information has been helpful to you! If you have any questions about placing an offer on a property, feel free to contact me. I’d be happy to walk you through the contract. If you’d like even more detailed information about purchasing a home, I encourage you to look into my book, “How to Buy a House in Houston, TX.”