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  • Kristen Wright, Realtor

Surprises Are Fun...Except in Real Estate Class 101


I hate surprises. For instance: I hate it when I go to the dentist for my 6 month cleaning and they find a cavity. And “SURPRISE”...for some crazy reason the appointment after mine cancelled and they can actually take care of my filling today. I hate that.


Or I’m checking out of the line at the grocery store after shopping for an HOUR and when I go to pay, I can’t find my credit card. Of course I don’t have a check book with me because who uses checks anymore? SURPRISE...no groceries for me. I hate that.


Or when I’m running out the door in the morning to meet some sweet first-time homebuyers and show them houses. I start my car and the low-tire-pressure indicator on the dash is waving it’s ugly little finger at me because, soon to find out, I have a big fat nail in my tire. Surprise. I hate that, too.


But buying a house shouldn’t be full of surprises and your realtor should do everything in their power to educate you along the journey to avoid potential surprises. And often times, this starts with a wee bit of education around what money you need to have on hand when buying a house. Don’t get me wrong: I am a realtor....not a mortgage guru. But there are some fundamentals around money that we are going to talk about for a minute. Because the last thing you want to happen after seeing the perfect house and being ready to submit an offer, is to be surprised about the money you need to have ready. Surprises like that stink.


So here’s the deal:

In the state of Texas when you submit an offer for a property....and after both parties land on an agreement, that “offer” is signed by both parties and it now becomes an executed contract. Once you have an executed contract, you (the buyer) needs to pay within 3 days after the effective date of the contract the following:


1) Earnest money. This is typically 1% of the sale price of the property and it’s paid to the title company. When you go to the closing for the property, you will see this as a credit back to you. But be prepared for the title company to cash the check quickly. They don’t hold on to that bad-boy. So have that money ready and then watch it leave your account within those 3 days after you get under contract.


2) Option money. This can be any amount from $100 on up. Ask your realtor for guidance based on the price range of the house and competition in purchasing the house. This is a check you will write to the actual homeowners and will also be credited back to you when you close. But just like the title company, you should expect the homeowners to cash this check right away.


3) The third item you need to be prepared to pay immediately is for your home inspection. You will NOT get this money back. You may be able to pay with a credit card, cash or check. But this is arguably the most important money you will spend when purchasing a home.


We will talk more in-depth in future blogs about each of these specific actions: Earnest money, option money/option period, and home inspections. But THIS blog is all about not being surprised by the cash you need available when you get an offer accepted for a property.


So things for you to ponder and COMMIT to:


* Make sure that you have this money available when you are preparing to purchase a home. Your down payment for a house is entirely separate from these items. Don’t be I hate surprises. For instance: I hate it when I go to the dentist for my 6 month cleaning and they find a cavity. And “SURPRISE”…for some crazy reason the appointment after mine cancelled and they can actually take care of my filling today. I hate that.


* Or I’m checking out of the line at the grocery store after shopping for an HOUR and when I go to pay, I can’t find my credit card. Of course I don’t have a check book with me because who uses checks anymore? SURPRISE…no groceries for me. I hate that.


* Or when I’m running out the door in the morning to meet some sweet first-time homebuyers and show them houses. I start my car and the low-tire-pressure indicator on the dash is waving it’s ugly little finger at me because, soon to find out, I have a big fat nail in my tire. Surprise. I hate that, too.


But buying a house shouldn’t be full of surprises and your realtor should do everything in their power to educate you along the journey to avoid potential surprises. And often times, this starts with a wee bit of education around what money you need to have on hand when buying a house. Don’t get me wrong: I am a realtor….not a mortgage guru. But there are some fundamentals around money that we are going to talk about for a minute. Because the last thing you want to happen after seeing the perfect house and being ready to submit an offer, is to be surprised about the money you need to have ready. Surprises like that stink.


So here’s the deal:

In the state of Texas when you submit an offer for a property….and after both parties land on an agreement, that “offer” is signed by both parties and it now becomes an executed contract. Once you have an executed contract, you (the buyer) needs to pay within 3 days after the effective date of the contract the following:


Earnest money. This is typically 1% of the sale price of the property and it’s paid to the title company. When you go to the closing for the property, you will see this as a credit back to you. But be prepared for the title company to cash the check quickly. They don’t hold onto that bad-boy. So have that money ready and then expect it to leave your account within those 3 days after you get under contract.

Option money. This can be any amount typically from $100 on up. Ask your realtor for guidance based on the price range of the house and competition in purchasing the house. This is a check you will write to the actual homeowners and will also be credited back to you when you close. But just like the title company, you should expect the homeowners to cash this check right away.

The third item you need to be prepared to pay immediately is for your home inspection. You will NOT get this money back. You may be able to pay with a credit card, cash or check. But this is arguably the most important money you will spend when purchasing a home. Your home inspection doesn’t have the same time requirements for paying that the Earnest money and Option money have. But the point is that you need to be prepared to pay this immediately after getting into an executed contract.


We will talk more in-depth in future blogs about each of these specific actions: Earnest money, option money/option period, and home inspections. But THIS blog is all about not being surprised by the cash you need available when you get an offer accepted for a property.


So things for you to ponder and COMMIT to:


Make sure that you have this money available when you are preparing to purchase a home. Your down payment for a house is entirely separate from these items. Don’t be surprised.


Once you have an executed contract, have your realtor check with the title company to see what options you have for paying the earnest money. Some title companies are starting to use online money transfer options making it easier for you. If they don’t allow that, plan ahead and get checks from your bank beforehand. And if you don’t know how to write a check, there’s a YouTube for that. (joking, not joking)


Start asking your realtor, friends and family for referrals for inspectors. Do your homework and get price ranges for homes similar to those with your criteria. Be sure to include specific options in the inspection when/where appropriate (pool inspections, sprinkler system inspections, termite inspections, etc.,…). Have a ballpark cost and be prepared. No surprises!



Be The Reason Real Estate Group takes pride in helping our clients. If you want to experience what that looks like, give us a call. We are more than happy to help. And while we know that surprises may still happen within a real estate transaction, it’s our job to do our best to eliminate them as much as we possibly can. Educating you is the first and most important step in doing just that.

surprised.

* Once you have an executed contract, have your realtor check with the title company to see what options you have for paying the earnest money. Some title companies are starting to use online money transfer options making it easier for you. If they don’t allow that, plan ahead and get checks from your bank beforehand. And if you don’t know how to write a check, there’s a YouTube for that. (joking, not joking)


* Start asking your realtor, friends and family for referrals for inspectors. Do your homework and get price ranges for homes similar to those with your criteria. Be sure to include specific options in the inspection when/where appropriate (pool inspections, sprinkler system inspections, termite inspections, etc.,...). Have a ballpark cost and be prepared. No surprises!

Be The Reason Real Estate Group takes pride in helping our clients. If you want to experience what that looks like, give us a call. We are more than happy to help. And while we know that surprises may still happen in real estate transactions, it’s our job to do our best to eliminate them as much as we possibly can. Educating you is the first and most important step in doing just that.


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