House Hunting Part 6 – Pulling the Trigger

Sometimes it is the first home you tour; sometimes the hunt goes on for months searching high and low for the perfect abode. With the list in your hand, you eliminate the wrong ones and each one you discard gets you closer to the one you will keep. All will click, the house will feel like yours, down to the layout, the features, the neighborhood, and you will know when it is the right one. Now you are ready to pull the trigger. If you have your pre-qualification or better yet pre-approval letter, are aware of your price limitations, and have some cash on hand, making an offer is easy.

First, your house-hunting guide should produce a comprehensive market analysis (CMA/Comp) of the house to determine if priced correctly. After reviewing a few listings, you will start to notice overpriced or undervalued houses, however until your Realtor completes a CMA you will not know for sure how much you should pay. The danger the house hunter must avoid is paying too much. Some types of loans have strict appraisal guidelines which could come back to bite you in the contract phase of the process. If the Buyer agrees to dish out, too much for the perfect castle, he/she may find the home does not appraise and if that is the case, someone must shell out the difference and this might create an awkward and unaffordable situation.

An offer is a contract only signed by one party, the Buyer. The Seller accepts the offer and signs the document and when executed becomes a contract. In Texas, we use the “One to Four Family Residential Contract” promulgated by the Texas Real Estate Commission (TREC). The offer states the exact address and legal description of the abode and shows the amount offered to purchase and what kind of loan you plan to use as well as the down payment. The down payment depends on the loan. A conventional loan can require 5-10% down, while a FHA loan only requires 3.5%. VA loans are as little as no down payment provided you qualify. Everything on the contract/offer is negotiable. The offer states the exclusions from the contract usually found on the Multiple Listing Services (MLS) info sheet and includes items the Seller wants to keep. This can include anything from curtains to built-in speakers. All in the home attached, nailed down, screwed in etc. is considered a part of the house and is only excluded using this portion of the agreement. In Texas, the Seller may keep the refrigerator. All other build in equipment must stay.

Earnest money is a guarantee the Buyer will come to the table at closing. Except for certain circumstances spelled out in the contract, the Buyer could lose this money should he, /she breaches or breaks the contract. Typically, earnest money is $1,000 for every $100,000 of purchase price and paid with a check made to the title company. The title company holds the money, which is returned to the Buyer at closing. The hunter must submit a copy of this check with the offer. The title company requires a current survey; in some cases, the Seller has a good copy of a survey yet in most cases, a new one is required. Who pays for a new survey is negotiable. If the listing needs repairs, there is a section of the contract to negotiate whatever needs fixing. Closing costs are also negotiable consult with your lender the amount a Seller can pay per loan terms. The offer also demands the Seller to submit a Seller’s Disclosure; provided the Seller does not give the Buyer a disclosure, the Buyer can terminate the contract at any time with escrow money returned. The Seller typically pays for Title insurance and the home warranty. The offer also states the estimated closing date. The closing date depends on some factors, usually how long the loan funds. The closing date can also hinge on the Seller or Buyer, when one can move in or the other move out, and instructs when possession of the abode takes place. Most of the time it is after funding of the loan, however maybe the Seller needs a couple extra days to move out, a temporary lease is submitted either with the offer or during negotiations. The option period can cost $100-$150 and gives the Buyer typically ten days to cancel out of the contract for any reason what so ever and not lose the escrow money. If the contract is broken during this period all the Buyer loses is the option money. If the option is not used the money is returned at closing. A “Third Party Financing Addenda” is attached to the offer when the Buyer is obtaining a loan. A good Realtor http://www.djlyons-realtor.com will help you with the offer and should explain every detail.

Submitting an offer to the Seller’s representative consists of the contract signed only by the Buyer, the “Third Party Financing Addenda” if a loan is involved, a copy of the escrow check and a copy of the option check. Once sent off, it is time to say a prayer and cross your fingers. Sometimes the response comes right away and sometimes the answer takes a few days. Making an offer is exciting, fun and nerve-racking however, the joy has only begun. See you down the road.