Everyone knows about making an offer for a property based on price. Few people know there’s a lot more to submitting an offer for a home in Texas than making an offer on the price. Here’s everything you need to know and decide when making an offer.
Exclusions. Exclusions are anything that is not included with the purchase of the home. Sellers will often inform their agents that there are certain items in the home that are not included. Examples include curtains, wall-mounted TVs, potted plants, washers and dryers, and refrigerators. The list of exclusions is made available to agents to share with their respective buyers. This known information should be included in the offer. Though less common, a buyer can request that items be excluded and removed from the property as part of the sale.
Sales Price. The sales price is compromised of the cash amount plus the financed amount. For buyers using a lender, this amount is the downpayment plus the financed amount. For example, $20,0000 downpayment plus $180,000 loan is a $200,000 sales price. For cash buyers, the cash amount and the sales price are the same because nothing is being financed with a lender. The sales price is negotiable but in a seller’s market, there is fierce competition and there’s little room to negotiate on the price.
Earnest Money and Option Fee. Earnest money is a good faith deposit paid to an escrow agent – usually the title company – towards the purchase of the home. It’s typically 1% but this is negotiable and not required. The buyer is credited for the amount of earnest money at closing. The option fee is the purchase of a set amount of days for a set amount of money for the buyer to do due diligence such as property inspections. In a seller’s market, the option period is typically 7 days or less for $25-30 days per day. In a buyer’s market, the option period is typically 7-10 days for $15-20 per day.
Title Policy. Title policy is insurance that protects a buyer’s ownership right to the home, both from fraudulent claims against ownership and from mistakes made in earlier sales, such as misspellings of a person’s name or an inaccurate description of the property. Though it is customary for the seller to purchase the policy on behalf of the buyer, this is negotiable. An easy way to strengthen an offer is for the buyer to elect to purchase his/her own title policy. Unlike other insurance that is paid every month and can vary from one agency to the next, title insurance is a one-time purchase with rates set and controlled by the Texas Department of Insurance.
Survey. A property survey, also known as a boundary survey, is a precise, professional measurement of your land’s boundary lines. It is important for knowing property lines or building additions to a home. If the seller has an existing survey he/she will provide a certified copy as well an affidavit that the survey is correct and note any changes (such as an addition of a pool or shed) since the survey was last done. If the seller does not have one or is not providing their existing survey, the buyer usually purchases it at his/her own expense though it’s negotiable to ask the seller to purchase it at the seller’s expense. If you are a cash buyer, you can elect to not purchase a survey. If the home purchase is financed your lender will require a survey.
Objections. Objections detail the use of the property that the buyer must be able to perform on the property. Examples include building a pool or the ability to utilize the home as a short-term rental. The buyer has a set amount of days for due diligence to make objections.
Repairs Request. Buyers can purchase the property as-is or request repairs in the contract. If there are known issues with the property the buyer can include those repairs requests in the contract. For example, if a buyer notices a leaky faucet, broken door handle, or stained carpet, he/she can ask that the seller remediate those issues. It’s important to note that buying a home as-is does not mean that the seller cannot ask for repairs after doing a property inspection. After the inspection is done during the option period an amendment is submitted to the seller to address newly revealed issues with the property.
Residential Service. If the buyer is purchasing a home residential service (better known as a home warranty) he/she can ask the seller is to reimburse the buyer for a specific amount for a home warranty. Sellers know that this is something that will make the purchase of their home appealing and seldom negotiate against paying for a home warranty. In a competitive seller’s market, however, a buyer that does not ask for the seller to pay for the home warranty will help make the offer more competitive.
Closing Date. The closing date is the date that ownership transfers from the seller to the buyer. This is the date that both parties sign the final paperwork to close out the transfer. You will often hear real estate agents say “at closing”, “the day of closing”, or “when you close” in reference to this date.
Possession. Possession is the date the property transfers from the seller to the buyer. It is almost always the same date as the closing date but there are exceptions. If the seller needs to remain in the property after closing, he/she will sign a short-term lease for an agreed-upon amount of days and for an agreed-upon amount of money to pay the buyer (new owner). This happens if the seller is purchasing a new home but is not able to move into the new property before closing on their current home. If the buyer needs possession of the property prior to closing, he/she will sign a short-term lease for an agreed-upon amount of days and for an agreed-upon amount of money to pay the seller. The most common reason is that the buyer has to move out of their current home prior to the closing date.
Buyers’ Expenses. Buyers can ask sellers to make a contribution towards their expenses (closing costs) to purchase the home. In a buyer’s market sellers are more willing to contribute towards a buyer’s closing cost. In a seller’s market, it weakens a buyer’s offer to ask the seller to contribute towards the buyer’s expenses.
Non-Realty Items. Buyers can request the seller leave personal items with the property that belongs to the seller for a set amount. Examples include a washer and dryer, refrigerator, lawnmower, and furniture.
Subdivision Information & Resale Certificate. If the property is in a neighborhood with a Homeowners’ Association (HOA), the buyer can select who (buyer or seller) pays for the Subdivision Information or select to not receive it all as well as who pays for any transfer fees required by the association.