Transaction Guide

The steps and parties involved from offer to closing

Once an offer is negotiated and accepted, the executed contract, the earnest money is taken to the title company and the title company writes a receipt. The option fee is delivered to the Seller or Seller’s Agent and a receipt is written. (See below for the brief guide to contract terms.)

Title Co.

The title company’s job is to act as escrow agent and receive all the documentation from all parties, provide title searches and title insurance, disburse funds according to instructions, get the deed recorded, and various other details to facilitate the closing of the transaction.

The title company immediately orders the title work, which shows what all the liens are against the property. Depending on how busy they are, it can take anywhere from 2 to 14 days, but a week is about average. The buyer is given a copy of the title report to give the opportunity to object to anything. Usually there are no surprises here, but the buyer can get out of the contract if there’s a problem and the seller can’t fix it.

If the seller has not already done so, he must provide the buyer with a “Seller’s Disclosure Notice”, which discloses whatever the seller is aware of concerning the property. If the home was built prior to 1978, a “Lead Paint Disclosure” must also be provided. If there is a mandatory membership in a homeowner’s association, seller must provide an Addendum for Property Subject to Mandatory Membership in an Owner’s Association. The buyer signs the notices evidencing receipt, and returns a copy to the seller.

Some other items the seller needs to give the title company are the loan payoff information (a mortgage payment invoice will do), an existing survey if there is one, and the Homeowner Association information if there is one. There’s a pile of HOA papers that buyers get when they buy a house, which they never read and promptly file away and forget about. As the seller, it helps if you find these papers and give them to the title company. It also helps if you provide the title company with the HOA management phone number. Timeline: The first week after the title company received the contract. (Efficient title companies will pester you and your listing agent until they get these things.)

Buyer orders home inspection

The buyer should not waste any time ordering a home inspection. A home inspection typically costs about $350 for an average size home, plus $75 if it includes a termite inspection. To see what a home inspection report looks like, click Sample Home Inspection. (Note that home inspections are often just about 10 sheets of paper with various boxes checked, and not always in the professional format in the sample.) The Home inspection will tell the buyer just about anything wrong with the property that is not readily apparent. Timeline: ASAP after contract, and preferably completed 3-4 days before the end of the option period to allow time to negotiate any needed repairs.

Repairs

Once the inspection report has been reviewed by the buyer, it’s often back to the negotiation table to figure out which repairs the seller is willing to do, and what the buyer is willing to accept. Generally, the buyer can cancel the contract at this stage, and it’s normally during the option period anyway.

Loan Application and Appraisal

The buyer applies for the loan if he/she has not already been approved, and the mortgage company will order the appraisal. The buyer has to pay for the appraisal, so the smart buyer has the mortgage company wait until after the home inspection to order the appraisal. This is to make sure the buyer doesn’t waste money on an appraisal for a house he/she may not want to buy after getting the inspection report. Timeline: An appraisal should be ordered right after the option period, and in no event later than 10 days before closing. The appraisal report should be in the lender’s hands at least a week before closing. Delayed appraisals lead to delayed closings!

Survey

Lenders normally require a survey. If the seller has an old survey from when he bought the home, that is usually acceptable to most lenders. If not, the buyer normally pays for a new survey, which costs an average of $350 or more. The title company or the mortgage company arranges the survey. Timeline: At least a week before closing. Although a survey can be done a few days after being ordered, it’s best to get it ordered as soon as you know it’s needed to avoid possible delays.

Insurance

Buyer must contact an insurance company and order a homeowner’s insurance policy. It is preferred that the insurance commitment is obtained during the option period. The information is given to the title company and the mortgage company. Timeline: Insurance can be obtained in a few days, but it’s best for the buyer to get this lined up a week or two before closing in case there are any problems.

Home Warranty

Almost all contracts call for the buyer to receive a home warranty, which covers repair costs for heating and air conditioning units, major appliances, etc., usually for a period of a year after the closing. Typical cost is $350 or more depending upon the size of the home and features included, and the title company and/or your agent can suggest some companies. The buyer selects the home warranty company, and the seller pays for it up to the amount specified in the contract. Timeline: Not critical. Buyer should let the title company know who he wants to use at least a day before closing, preferably sooner.

Final Walk-Through

Usually the day before the closing the buyer may want to do a “walk-through” to make sure everything is where it’s supposed to be, and that there are no problems with the property. The Seller will want to obtain a walk-through acceptance form from the buyer. This is advisable, but not everybody does it.

The Closing

On the closing day, the buyer and seller go to the title company, at different times. The Buyer brings a cashier’s check (if there is money due) made out to the title company, and the seller brings the keys. Each signs a pile of papers, the buyers are given the keys once the funds have been distributed and the seller gets a check. This is called “Funding”. The seller may have to wait a few hours or a day to get his money, so it’s often just wired to a designated account for the seller’s convenience.

A brief description of the most commonly used forms

When making a counter-offer, it is customary to simply make changes to the offer presented, initial those changes, and fax it back. The proper way to make a change is to draw a single line through whatever you are changing such that what was crossed out is still visible, write in the new term or condition, and initial it. After the other side approves the changes by adding their initials, you have a valid contract. Once both parties have initialed all the changes and signed the contract on page 7, it is considered an “executed”" contract.

Standard Contract Terms

Here’s a quick guide to what is typical in a contract in the state of Texas. This does not constitute legal advice, and we must advise you to seek the help of a lawyer or real estate professional. If any of the following is confusing to you, don’t try to do it yourself. If you are frugal and don’t want to spend money for an attorney, we can tell you that title companies routinely help clients fill out contracts in order to attract business, and don’t charge for the service. But they won’t give you legal advice.

We will begin at the top of page one, and go through each clause by number. We will skip clauses that are self-explanatory or don’t have blanks to fill in. We urge you to read the entire contract thoroughly, and ask a professional for advice if there is anything you don’t understand. The numbers on the left refer to paragraph numbers in the contract.

1. Make sure the seller is really the owner if you’re the buyer, or that the buyer is really the one who will be obtaining the loan and will be on title if you are the seller.

2. Don’t worry about the legal description; the street address is good enough. The title company will enter the legal description on the official copy you will sign at the closing.

3. Note that “A” is the down payment; and “C” is the sales price. Everybody gets this reversed the first time.

4. Most of the time the buyer wants the contract to be contingent upon obtaining a loan. In that case, check “A” and fill in the amount of the loan, and check “(1)”. You will also need to complete a “Third Party Financing Condition Addendum”, which is reviewed below.

5. The earnest money amount is typically 1/2% – 1% of the sales amount. For example, $1000 is typical for a $175,000 home. Enter the name and address of the title company you will be using. You should look into title companies when you first put your house on the market so you don’t have to figure it out when you are writing a contract. If you don’t have any particular preference, it’s ok to go with the title company the buyer’s agent recommends. They may try harder if they know the agent and want to continue getting his/her business.

6. A. Who pays for the title policy is totally negotiable, but 98% of the time the seller pays.

6. C. Most of the time, the seller has a copy of an old survey lying around somewhere. If not, it’s typically the buyer who pays for a new survey, but this is totally negotiable. The new lender specifies what is an acceptable survey.

6. D. 3-5 days is normal.

6. E. (2) Check the box regarding owner’s association membership (homeowners association). Note that if membership in a homeowner’s association is manditory, you should also complete an Addendum for Property Subject to Manditory Membership in an Owner’s Association.

7. B. If the Seller’s Disclosure Notice is provided at the time of signing the contract, check “(1)”. Otherwise check “(2)”. 2-3 days is a normal period of time to produce the the Notice (see notes regarding this form below) Note: We attach the Seller’s Disclosure to the listing in MLS any time a seller provides us with one. If there is a buyer’s agent involved, he/she should have gotten it from there even before they wrote the offer.

7. D. Enter the repairs the seller has agreed to make. An occasional annoyance is the buyer who waits until after the inspection to ask for modifications/repairs they already knew they wanted when they made the offer. This is most common with inexperienced agents with no common sense. If the buyer wants an allowance for new carpet, or wants the back door with the doggie flap replaced, it should be entered here at the time of the offer.

7. H. A Residential Service Contract (generally referred to as a Home Warranty) is like an insurance policy that covers the buyer in case something goes wrong with a built-in appliance or Heating/AC system. Policies are generally for 1 year and extra coverage can be added to include things like pool equipment, washers and dryers. It is customary for the seller to pay for a home warranty plan for the buyer, but this is totally negotiable. Cost for a basic policy is about $350, so that’s a typical amount buyers ask for in offers. Your title company can suggest several companies. As the buyer, you may want to make your selection at least a few days before closing so you have time to compare.

9. A. Enter your anticipated closing date.

10. Check the box indicating when possession will take place.

11. If there are any other special provisions not covered elsewhere in the contract, enter them here.

12. A. (1) (b). Here’s where you put what the seller will contribute to the buyer’s closing costs and expenses. It is common for buyers to ask the seller to pay for some of the buyers’ closing costs. A $3000 seller contribution to buyer’s expenses or a price reduction of $3000 have the same effect, so it should make no difference to the seller. When negotiating a contract, it is wiser for the seller to counter-offer with a higher purchase price and leave the contribution to buyer’s expenses as is, even if it means the purchase price needs to be increased beyond what the listing price is.

Warning: There are closing fees charged to the seller for FHA and VA loans that the buyer is not allowed to pay. These can range from $700 to $1000. If this space is blank, and the seller has consented to an FHA or VA loan by signing the Third Party Financing Addendum, the seller could get stuck with unanticipated closing costs. If this blank is filled in with an amount over $1000, those fees would be included in that amount, so there wouldn’t be any surprises.

16. Most people would rather have a dispute mediated than go to court, so they check “will”.

21. Enter the buyer and seller contact information.

22. Check off all the addendums and disclosures that the buyer is getting at the time the contract is executed. Not giving the buyer the “Seller’s Disclosure Notice” or “Addendum for Property Subject to Mandatory Membership in an Owner’s Association” at the time of signing the contract is like giving the buyer 7 days to get out of the contract from the date the buyer finally receives it. Having those items checked off and part of the contract does not give the buyer that 7 day latitude. Smart sellers have these forms filled out and copies made before the first prospective buyer comes to look at the house.

23. It is customary for the buyer to have a period of time to back out of the contract for any reason, for which the buyer pays an option fee. $100 or more for an option period of 7-10 days is typical for an average price home. Legally, the buyer has 48 hours to get the option fee to the seller, or risk losing the option to cancel. It’s amazing how sloppy many buyer’s agents are about making sure the seller gets the option fee and signs the receipt. Many will simply drop the option check in the mail to the listing agent and forget about it. As a buyer, you want to make sure you get the signed receipt from the seller within 48 hours as proof that the seller received the option fee timely.

24. Enter attorney information if either party is using one.
The “EXECUTED” date (right above the signatures) is the date that all the terms of the contract are agreed upon, all changes are initialed, both parties have signed, and both parties have received a fully executed copy. Once all this is done, the agent representing the party to agree to the terms last will enter the date. If the date is left blank, technically a buyer’s option period never expires, and all the deadlines in the contract are meaningless.

Before everything is agreed upon, signed, and delivered, you are still in the “offer” stage, and the EXECUTED date is left blank.

The last page, page 8, is where the broker and agent information is entered. Buyer’s Broker information is always on the left; Listing Broker information is always on the right. If we listed your property on MLS, CENTURY 21 Judge Fite’s information MUST be entered on the right side, even if we are not receiving any commission. NO EXCEPTIONS! (This requirement is spelled out on page 2 of our listing agreement.) All our information is at the top of you listing agreement and also on the Contact Us page of this website.

Page 8 also serves as the receipt page for the option money received by the seller, and earnest money received by the title company.

Third Party Financing Condition Addendum

This form must be filled out if the contract is contingent upon the buyer obtaining a new loan. Enter the number of days by which the buyer is to have loan approval. Check the appropriate boxes according the type of financing the buyer will be applying for. Note that the greater the loan amount and the lower the interest rate that is entered, the more likely it will be that the buyer will not qualify for the loan, and be able to use this as a way to get out of the contract.

Seller’s Disclosure

The seller needs to fill out this form and give it to the buyer in the time specified in the contract. If you are the seller, it’s wise to have it completed in advance, and give it to the buyer at the time you are signing the contract. If you give this Seller’s Disclosure Notice to the buyer any time after signing the contract, the buyer has 7 days to get out of the contract for any reason from the date of receiving the Notice. If you’re the buyer, and you’re are dealing direct with a seller who doesn’t know this, you can use it to your advantage – you technically have a 7 day option period that you don’t have to pay for.

Addendum for Property Subject to Mandatory Membership in an Owner’s Association

It’s wise to have this form completed in advance, and give it to the buyer at the time you are signing the contract. If you give this addendum to the buyer any time after the signing of the contract, the buyer has 7 days to get out of the contract for any reason from the date of receiving the addendum.

Lead Paint and other forms

If the home was built prior to 1978, the Seller’s Disclosure Notice needs the additional “Lead Paint Disclosure”

Other Forms

Any other forms you may need, such as a Buyer’s or Seller’s Temporary Lease, amendment and addendum forms, cancellation forms, etc., are all available and will be included by us when required. you familiarize yourself with all of the forms you may be using, and ask a professional for advice if anything is not clear to you. Note: Once upon a time the Texas Association of Realtors complained about us providing their forms on our website for the public, so we had to remove a few forms. If there is a form you need that you don’t see on our forms page, call us and we’ll get it to you.

Loan Pre-Approval Letter

As a seller, you want to be very wary of entering into a contract with a buyer who has not gotten pre-approval for a loan. When you enter into a contract, you are effectively taking your house off the market. If you find out a month later that your buyer can’t get a loan, you’ve wasted a month and missed other potential buyers. It’s not wise to enter into a contact without obtaining a strong pre-approval letter from a reputable lender.

WARNING: There are unscrupulous lenders who routinely give pre-approval or pre-qualification letters to borrowers who they know will never get the loan. Why? Because they charge the borrower all kinds of nonrefundable fees, often thousands of dollars. They play the game, tell the unsuspecting borrower they’ll get them the loan, string everybody along, and charge their outrageous fees. The day before the closing, the crooked loan officer tells the borrower how sorry he is that the underwriter didn’t approve the loan, and how he (the crooked loan officer) did everything he could to fight to get an approval.

This happens most often with homes in the lower price ranges with first-time home buyers (under $130,000) and is rampant in lower income areas and homes under $80,000. Low income borrowers, unsophisticated buyers, minorities, and people who have difficulty obtaining financing are the most common targets. The likelihood of it happening reduces as the price of the home and the income and education level of the buyer increases.

As the seller, you want to get a Pre-Approval letter from a mortgage company name you recognize. If your home is in the lower price ranges and the buyer has a loan officer working for a rinky-dink mortgage company, you may want to ask some more questions. If you find out the buyer is also paying high nonrefundable fees to the mortgage company, you and the buyer may be in trouble.

Loan Pre-Qualification vs Pre-Approval

Generally, a Pre-qualification Letter means the mortgage company has talked to a borrower on the phone, and based on what the borrower said, he/she should be able to get a loan. They may or may not have run the borrower’s credit to make this determination. Basically, a pre-qualification letter means little or nothing.

A Pre-Approval Letter carries more weight, and generally means the mortgage company has taken a complete application, considered the credit report, and received complete documentation from the borrower such as W-2, paycheck stubs, bank statements, and/or tax returns. The borrower has been approved, and the only conditions remaining are approval of the property, and that the mortgage company can refuse the loan if the borrower’s situation substantially changes before the closing date, such as if the borrower loses his/her job.

This terminology will vary depending on the lender, but the most important issue is that a complete application with credit report and all of the buyer’s documentation has been done and was approved.

If you are the buyer, you are wise to get a loan pre-approval letter before you start looking at houses. That letter can easily make the difference between an acceptance or rejection of your offer. Include a copy of the letter with any offer you make.

 

 

 

Seller’s Frequently Asked Questions

Commission rates are supposed to be negotiable, so why can’t I negotiate the commission with an agent who makes us an offer?

Once it’s decided what commission is to be offered to the buyer’s agents for bringing their buyers, that commission amount is entered in the MLS by the listing broker. This creates a contractual obligation for the listing broker to guarantee that commission to any agent who produces a buyer.

It becomes clearer when you consider why the MLS was created in the first place. The concept is for agents make their listings available to all the other agents to sell, and to be able to show their buyers all the other agents’ listings as well as their own. The traditional 6% commission is split in half, with 3% going to the buyer’s agent, and the other 3% to the listing broker. They all sign a contract with each other to make this work, and thus the MLS is created. This makes a lot more sense than listing your home with multiple agents, or having to deal with a different agent for every house you want to see.

The results of a seller trying to negotiate down the commission after receiving an offer can be any one or all of the following:

1. Agent calls us to complain
2. Agent refuses to conduct any further negotiations with the seller, and threatens to file a complaint with the real estate board
3. Agent’s broker actually files a complaint with the real estate board
4. Agent’s broker files a lawsuit against us for the commission
5. Listing broker will cancel your listing!

If you don’t want to pay a 3% commission to a buyer’s agent, then whatever you are willing to pay must be stated in your listing agreement and will be entered in the MLS.

Your listing agreement says we will pay 3% to buyer’s agents, but we only want to pay 2%. Can we change it?

Of course you can. But unless your house worth about $1,000,000, it’s not a very good idea. You could get away with it if your house were in California or New York, where houses cost 3-4 times what they cost in Texas. In Texas, about 99% of all homes are listed with 3% being offered to buyer’s agents. The result of offering less is that most agents won’t show it. They will simply tell their buyers it’s not available.

Of course agents are supposed to look out for their clients’ best interests and aren’t supposed be selfish. And they even make this promise when they join the real estate associations. So they should show your house, shouldn’t they? The truth is that they won’t because they care about their commission more than anything else.

The smartest thing to do is set your price to include a 3% commission for a buyer’s agent, and leave less room for negotiation. If a buyer comes along without an agent, there’s 3% room for negotiation. If you insist on 2% anyway, here’s what will normally happen:

1. Your house will get far fewer showings
2. Some agents assume it’s 3% without looking, and write their offer to include a 3% commission anyway. Then there’s the problem of restructuring the offer, which usually ends up irritating the agent as well as the buyer. The result is you end up agreeing to pay the 3% anyway or they go buy something else.
3. Most agents who do notice the lower commission offered and are still willing to show the house will have a written agreement with their buyers that guarantees the agent a 3% commission. The buyer then has to pay his agent the other 1%, which is 1% less he is willing to pay for your house than some other similar house. The result is that it would be the same deal to the buyer if the house were listed for 1% more with a 3% commission. It’s just more complicated and tends to annoy the buyer.
4. Almost all sellers who start with 2% eventually increase the commission to 3% after the house doesn’t sell at 2%, and they miss out on the first 2-3 weeks when a listing is fresh and buyers are more anxious to make offers.

Should I accept a Contingent Contract?

A Contingency Contract is when a buyer offers to buy your house, but only after his house sells. If his house doesn’t sell, he can back out of the deal to buy your house. The problem with contingency contracts is that any property under such a contract gets drastically fewer showings, and the buyer’s property may never sell. The seller may end up wasting a lot of time and money with his property effectively off the market in the hope that the buyer’s property will sell.

Most Realtors will advise against Contingency Contracts because they don’t know the right way to structure the contract. Contingent offers can be okay if you get the buyer to agree to list his property for the appraised value from an independent appraisal, and to agree in advance to periodic price drops until it sells. And if he doesn’t adhere to that agreement, the contract is canceled and he loses his earnest money. If this is part of the contract, you know that his house will eventually sell. The problem is that it isn’t always so easy to get the buyer to agree to that.

Most Contingency Contracts fail because the seller doesn’t recognize the “red flags” and doesn’t take the proper precautions. They’re tricky and there are many variables.

The form used for Contingency Contracts is the Addendum for Sale of Other Property by Buyer.

Is it better to market a house furnished or vacant?

Vacant, but it doesn’t make a huge difference. Don’t go through extra trouble of moving out so it can be vacant, but don’t make any effort to furnish a vacant house because somebody told you it will show better that way. If you have tenants, it’s better to get them out, clean it up, and show it vacant (unless it’s investment property). Tenants almost always cause showing problems. NEVER let somebody move into your vacant house because they will “help with showings” or any other reason. You don’t need them – you only need a keybox.

There are “home staging” companies that make a living furnishing houses to make them “show better”. If a seller would take whatever money a staging company would charge, and use it to reduce the price, the house will sell that much faster. Nobody buys an over-priced house no matter what furniture is in it. Builders furnish model homes when the home is also their office, but you won’t see them moving furniture in and out of their spec homes or inventory homes.

Advantages of a vacant house:

· Easier to show
· Easier to keep clean and in showing condition
· It looks bigger
· Buyers can visualize their furniture in the house better
· Buyers feel more comfortable looking at vacant homes
· Buyers who need a quick closing may choose to only view vacant homes because they know most sellers expect to have a month to move out.

Disadvantages of an occupied home:

· Showing problems with pets, tenants, or other occupants
· Annoyance of people trudging through your home and having to leave for showings (assuming you are, which is best)
There are no advantages of an occupied home or disadvantages of a vacant one. It is a common misconception that a home will sell faster or for more money if it’s occupied or furnished.

If we sign a contract, how do we know the buyer can qualify for a loan?

As a seller, you want to be very wary of entering into a contract with a buyer who has not gotten a pre-approval for a loan. When you enter into a contract, you are effectively taking your house off the market. If you find out a month later that your buyer can’t get a loan, you’ve wasted a month and missed other potential buyers. It’s not wise to enter into a contact without obtaining a strong pre-approval letter from a reputable lender.

WARNING: There are unscrupulous lenders who routinely give pre-approval or pre-qualification letters to borrowers who they know will never get the loan. Why? Because they charge the borrower all kinds of nonrefundable fees, often thousands of dollars. They play the game, tell the unsuspecting borrower they’ll get them the loan, string everybody along, and charge their outrageous fees. Then the day before the closing, the crooked loan officer tells the borrower how sorry he is that the underwriter didn’t approve the loan, and how he (the crooked loan officer) did everything he could to fight to get an approval.

This happens most often with homes in the lower price ranges with first-time home buyers (under $130,000) and is most common in lower income areas and homes under $80,000. Low income borrowers, unsophisticated buyers, minorities, and people who have difficulty obtaining financing are the most common victims. The likelihood of it happening reduces as the price of the home and the income and education level of the buyer increases.

As the seller, you want to get a Pre-Approval letter from a name you recognize. If your home is in the lower price ranges and the buyer has a loan officer working for a rinky-dink mortgage company, you may want to ask some more questions. You should be suspicious if the buyer is also paying high nonrefundable fees to the mortgage company.

What is the difference between being “Pre-Qualified”, “Pre-Approved” or “Approved” for a loan?

“Pre-qualified” generally means a borrower had a conversation with a mortgage company, and told a loan officer what their debts and income are. “Pre-Approved” generally means the borrower made a complete application with a mortgage company, and has provided paycheck stubs, bank statements, W-2s, and when applicable, tax returns. Technically, the term “Approved” means the loan has gone through underwriting, which can only be done after the property is identified and appraised and all conditions are met.

The problem is that various mortgage companies may use these terms loosely, and what is Pre-Approved to one company means Pre-qualified to another. The important thing is what the letter from the mortgage company says.

The mortgage company’s letter should state that the borrower has completed and signed a loan application, has provided documentation showing income and assets, and that the mortgage company has evaluated the borrower’s credit, and based on these items, the loan should get approved. The only significant conditions remaining should be that the property is acceptable to the mortgage company (title and value), and that there is no material change in the borrower’s credit or situation such as loss of a job.

Whether you are the seller evaluating a buyer, or a buyer who wants to make an offer on a property, the only kind of letter you should consider is one that states a complete application with supporting documents and credit report has been made, and that these items meet underwriting requirements, or words to that effect.

How much are closing costs?

Closing costs are an accumulation of charges paid to different entities associated with the buying and selling of real estate. For buyers, it is primarily what the charges are from the lender, plus insurance, tax pro-rations, and about $500 for escrow fees for the title company. This usually totals about 4-6% of the total sales price of a property. Some of the closing costs buyers might encounter are: property inspection and termite inspection, loan application and origination fees, appraisal fee, survey, county taxes, credit report, discount points, documentation fee, escrow fees, homeowners’ association fees, loan fees, mortgage insurance, tax registration and buyers title insurance premium.

For sellers, a good rule of thumb is 1% for title insurance and miscellaneous charges, plus $500 for escrow and related fees from the title company, plus property tax pro-rations. Anything else such as home warranty, survey, or buyer’s closing costs that the seller agrees to pay on behalf of the buyer needs to be added as well.

Property taxes are paid in arrears, so a tax bill that needs to be paid by 1/31/07 is actually for 2006 taxes, and isn’t usually even received until September of 2006. That means that if a house closed on 6/30/06, the buyer would get a credit for half the taxes, because he is accepting the tax burden for the period the seller had the house and didn’t pay any taxes. The seller has to pay the taxes for the first half of the year, which gets deducted from the seller’s proceeds. (The title company figures all this stuff out.)

Whenever taxes and insurance are “escrowed” (included as part of the monthly mortgage payment), the buyer needs to pay an additional amount at closing of about 3 months worth of taxes plus insurance. This can vary with the lender and the time of the year. If the seller escrowed their taxes and insurance, they get a credit for whatever is in the escrow account when they close.

What is a “Showing Service” and what do they do?Any time a property is listed on MLS, there must be one, and only one, phone number for agents to call to set up a time to show the property. Showings can be missed if a call to that phone number results in a voicemail, or even worse, a busy or no answer. The showing service answers all calls and sets up the showings; records the name of the showing agent and verifies the agent’s identity; gives the agent pertinent information such as keybox combinations, alarm codes, and any special showing instruction (i.e., don’t let the cat out, dog in back yard barks but won’t bite, etc.); and informs seller of the planned showing at any phone numbers designated. Other benefits are an email for each showing for your records, and a weekly showings report by email that shows the activity for the week in addition to agent comments and feedback.

The showing service is only for agents to set up showings through MLS, and not for use by the general public, so the showing service telephone number should NOT be put on flyers, yard signs, or any other advertising materials intended for buyers. The showing service is CSS (Centralized Showing Service), and is available in DFW, Houston, and San Antonio.
For more information about the Showing Service and keyboxes.

What is a home inspection?
There are numerous types of inspections. An inspection is meant to evaluate, at minimum, the structural and mechanical condition of a property. It is not the same as an appraisal which evaluates the market value of a property. Persons involved in real estate transactions need unbiased information about the physical condition of property they plan to buy or sell and your contract should include a contingency that you obtain a satisfactory inspection report.

Please note that the format of inspection reports vary, and they don’t always include pictures or as much detail as this sample report.

What does a home inspection include?

Every inspection should include, but not be limited to, an evaluation of at least the following:
· Foundations
· Plumbing and electrical systems
· Doors
· Ceiling, walls and floors
· Roof
· Hazardous materials concerns
· Heating and air conditioning systems
· Common areas (in condominiums)
· Insulation
· Ventilation

What’s the difference between a Home Inspector and an Engineer?

Home Inspector: A person who examines any component of a building, through visual means and through normal user controls, without the use of mathematical sciences.

Engineer: Does analysis or design work requiring extensive preparation and experience in the use of mathematics, physics, chemistry and the engineering sciences.

What is a wood-destroying organism inspection report?

A wood-destroying organism inspection report is a written opinion by a qualified state licensed structural pest control inspector based upon what was visible and evident at the time of inspection. The inspection report does not represent or guarantee the structure to be free from wood-destroying organisms or their damage, nor does it represent or guarantee that the total damage or infestation is limited to that disclosed in the report. Wood-destroying organisms include subterranean termites, damp-wood termites, carpenter ants, wood boring beetles and wood decay fungus.

What is a point?

One point is equal to 1% of the new loan amount. Lenders often charge an “origination fee”, which is normally 1 point, in addition to points. The greater the points, the lower the interest rate; the lower the points, the higher the interest rate.

What is earnest money?

When you make an offer, you will need to put up an earnest money deposit as a sign of good faith that you are seriously interested in buying a home. That deposit becomes a part of the purchase price and is held in a trust account with the title company until either the contract gets canceled or the deal closes. Typically, earnest money is 1/2-1% of the offer amount.

Is VA or FHA financing unfair to sellers?

FHA and VA loans provide purchasers the opportunity to buy homes with minimal cash investment and at lower interest rates. The result is a larger market for sellers, who also benefit by receiving all cash for their equity. There are some fees a seller must pay that aren’t required for conventional loans. The fees normally range from $600 to $1,000.

What is title insurance?

Title insurance protects the named insured against loss because of defects, liens, encumbrances, adverse claims or other matters not shown or disclosed to the new owner that attach before date of policy. All lenders will require title insurance to cover the loan amount, and buyers usually pay a little extra to cover them for the full purchase price.

What are the hazards of lead-based paint?

All sellers are required by law to supply buyers with a Lead Paint Disclosure regarding their knowledge of any lead-based paint hazards for homes built before 1978.

What is the difference between a Mortgage Broker and a Mortgage Banker?

The state of Texas differentiates between a mortgage banker and mortgage broker. A mortgage banker requires a larger net worth ($250,000) because it has the ability to engage in the entire loan process from origination through funding. A broker originates the loan and then relies on outside sources to handle the rest of the process. Most brokers cannot meet the financial requirements to originate FHA loans, whereas all mortgage bankers are able to originate FHA loans. In Texas, a broker and loan officers working under the broker must be state licensed. Loan officers working for mortgage bankers don’t need to be licensed because they are employees, and the mortgage company is federally licensed.

What is the difference between a REALTOR® and a Real Estate Agent?

 

 

 

Importance of Inspection

 

 

Build a Plan of Action and Get Ready

Buying a home will probably rank as one of the biggest personal investments one can make. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress. It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there.Before you can build a plan of action, take the time to lay the groundwork for your decision-making process. First, ask yourself how much can you afford to pay for a home. If you’re not sure on the price range, find a lender and get preapproved. Preapproval will let you know how much you can afford so that you can look for homes in your price range. Getting pre-approved helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are not in your price range.

Second, ask yourself where you want to live and what is the best location for you and/or your family. Things to consider:

*convenience for all family members
*proximity to work, school
*crime rate of neighborhood
*local transportation
*types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.

Considering Buying your dream home? Contact The Doane Realty Gourp by calling or texting 214-755-3378 or at realestate@doanerealtygroup.com for a FREE consultat

        

Why You Should Not Make Any Major Credit Purchases

Don’t go on a spending spree using credit if you are thinking about buying a home, or in the process of buying a new home. Your mortgage pre-approval is subject to a final evaluation of your financial situation. Every $100 you pay per month on a credit payment could cost your about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage.

Even if you have accumulated enough savings, you should consider not making any large purchases until after closing. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.

Getting Ready to Buy your Dream Home?…Give me a call for a FREE Consultation. Contact Steve and Mary Doane by calling or texting 214-755-3378 or at realestate@doanerealtygroup.com