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Let’s say you have gotten to the point to where you would like to write an offer on a home. I thought we would go thru the contract & related addendums and hit the high points. And how we get the contract accepted.
There are usually two sets of negotiation sessions on a home. The initial contract and then after the option period to negotiate repairs. We will write an offer, and I will then send the offer to the listing agent for presentation to the seller. The seller may accept our offer, or they may counter the offer. We may accept their new offer or we may again change the terms. This process continues until both parties agree on ALL items and conditions. All parties must sign & initial any changes in writing for the contract to be completed and binding. No verbal agreements are acceptable.
We will now have an option period to inspect the home. (The option period is usually about 7 days, but may be shorter or longer) This is also when you may decline to purchase the home and get your earnest money refunded. After the inspection, we may ask the seller to do repairs. We again start the negotiating just as we did on the initial contract. We may ask for certain items to be repaired & the seller may counter those requests. Again this process continues until we are all in agreement. Or failing an agreement, we would cancel the contract before the option period expires.
The main documents you will be signing for a resale single family residence is the 1-4 family resale contract & a sellers disclosure. Should you purchase a duplex or a new home the contracts will be different. The contract you are signing in Austin is the same one used in Dallas or Houston or Lubbock. The State of Texas with input from the Realtors and the State Bar design the contracts. Realtors cannot” practice law” and delete or add language to the existing contracts, except as allowed on the forms.
In addition to the contract, you will sign additional documents and addendum. The Seller’s Disclosure is probably the longest one. This is the document where the seller lists/checks off if the items in the home are functioning or not. And if the sellers knows of any defects in the home. By law the seller is to provide the buyer with any inspection reports that they have concerning the home. I typically don’t pay a lot of attention to the Seller’s disclosure. Unless the seller discloses an issue. Many times the seller fills this out in 5 minutes & forgets things or sometimes does not disclose issues. I want a qualified home inspector to go over the home.
I am going to hit the high points of each page of the contract. Warning…this may be boring to some people.
Page 1…Covers the names of the parties…the legal description of the property…the items affixed to the home that are staying…any exceptions that will not be staying…price and down payment…basic financing information…earnest money amount & title company handling the earnest money & closing.
Page 2…this page covers the title policy and the survey & who is responsible for paying for each one. It also covers what occurs if problems arise with either.
Page 3…Covers if the property is in an HOA ( home owners association)…& if it is, the items related to the HOA…If the home is in a Special Water/Utility district…Annexation…& that owner allows for a property inspection & that utilities will be on for the inspection.
Page 4…Goes over the sellers disclosure notice & was it provided to you…If you did not receive it, a time limit to receive it is gone over…covers repairs procedure & remedies…environmental hazards. ..Residential Service Contracts (in most cases the seller provides at their expense, a One year limited warranty)…Closing date & related items with closing.
Page 5…Continues closing items…Possession date of the sale…Special provisions allows us to write in certain things (example…we give the seller 24 hours to respond to our offer or it is null and void.) Settlement expenses of buyer and seller & if the seller is paying buyer expenses.
Page 6…Proration of taxes & payments…Casualty loss, what happens if for example,the home catches fire after the contract is signed…Default of buyer or seller…Mediation yes or no to resolve disputes…Attorney fees in the event of a dispute…Escrow and how it is applied and disputes.
Page 7…Continues escrow…Federal Tax issues, is the purchaser a US citizen…notices are to all be in writing and asks for both parties addresses and phone, fax, email to receive information.
Page 8…Lists all the forms that you sign to make up the contract package…Termination option/date (commonly called the option period) the time when the buyer can do inspections & if u wish to terminate, without penalty…Notice to have an attorney look a documents…Most pages both parties initial, this is where both parties sign. And the effective date of the contract is found.
Page 9…Used by brokers to furnish their contact info to each other and the title company…Option money is signed for by seller or seller’s agent…earnest money is signed for by escrow agent (usually title company)
Third Party Financing addendum is used by most purchasers. It in essence, to show the terms of your financing. If financing is not obtained, buyer can notify the seller and receive a refund of the earnest money. This notice must be in writing and in the time frame listed in the addendum.
YOUR MORTGAGE OPTIONS
If you are going to be buying a home very soon, you will want to get preapproved. Your will be offered the option to get prequalified too. There is a big difference…preapproval means you can close on a home with probably an appraisal and a few details. Prequalified…I can probably get your dog prequalified. Prequalified just says that if all the details and information you give the lender checks out, they might give you a loan.
Why is this important? If you write a contract on a home and there are multiple offers, the seller may want to go with the person whose loan is ready to go right now.
CURRENT AUSTIN MAXIMUM LOAN AMOUNTS
$417,000 Maximum conventional conforming loan amount.
$288,750 FHA loan amount
$417,000 VA with no down payment, VA jumbo loans are available with additional down payment
IF YOU ARE FIXING UP AN OLD HOME AN
FHA 203K PROGRAM MAY WORK FOR YOU.
There are still a lot of loan options out there for you to choose from. But for most of you, a 30 year fixed rate loan is the best. Or if you want to, you can get a 15 year mortgage. Remember you can always do a 30 year loan and make extra payments. Adjustable rate mortgages are still available, and depending on your circumstances, may be right for you.
If you are a veteran, a VA loan may be best for you with its zero down component.
And if you are looking for affordable homes, many times the FHA loans will work best for you.
I use a loan officer that I have worked with for a long time. Her name is Kristen Carroll and she is with Sente Mortgage. She returns her emails and phone calls and is honest. She has competitive rates, and excellent service. Beware of internet companies with low rates and terms. If it sounds too good to be true… well we have all been there.
