This is one post in a seven-part series designed to teach you about what to expect when you are considering buying a home in the Austin, TX area. The first three parts are here:
Congrats! You have found the home that will work best for your needs.
First, we need to sit down and compose an offer to be presented to the seller(s). We can do this anywhere you prefer – my office, your current home, restaurant, or even on the hood of my car. 🙂
Generally speaking, this can be accomplished in about 45 minutes to an hour, depending on how many questions you may have. The forms that we use to make an offer are all standardized, provided by the Texas Real Estate Commission. Although we will probably produce 10-12 pages of stuff, all of it is “fill in the blank” in nature, so it’s not quite as daunting as it sounds.
Included in the offer and any addenda that we need to include are ALL of the pertinent terms and conditions for the purchase, including:
Amount of earnest money that you are putting up as a deposit
Option period – I’ll come back to this one in a minute
Any closing costs that you are asking the seller to pay on your behalf
Obviously, there are a lot of other items covered therein, including a good deal of legalese.
ONE IMPORTANT NOTE: The offer is not considered to be accepted (“executed”) until the sellers have agreed to ALL of the details, not just the price. In other words, the sellers may be perfectly fine with the price, but they want to close sooner than we have proposed.
What is an option period?
In Texas, our contracts allow you, the buyer, to pay a cursory amount of money to the seller for “the unrestricted right to terminate the contract within ____ days”. WOW! This means that for a small fee (the “option fee”), you can back out of the contract with no further penalty as long as you do it during the specified period. Admittedly, it’s very rare that buyers use this provision – typically, it comes up as the result of an inspection that reveals repairs that seem overwhelming.
Getting a third-party inspection
We counsel all of our clients to get an inspection done when buying a home, whether it is brand-new or resale. The cost varies by the size of the house and any “extras” (pool, etc.), but an inspection on an average-sized home in this market would probably run $250 or so. The inspection report will give us a list of things that need to be repaired. We can then decide which things are critical to get the sellers to fix before closing. A good inspector will probably give you a very thorough list, including some items that are minor and not worth asking the seller to fix.
All of the timing on the contract is based on the executed date, which is the day that everyone has signed off on all of the terms of the agreement. If you have a 10-day option period, which is pretty typical here in Austin, the days start counting after the contract has been executed, and not before that.
Keep in mind that contract days are calendar days, NOT business days. If we agree to all of the terms on a Monday, you will have until the following Thursday to terminate under this example. Clearly, this means you want to have the inspection done quickly, so that you can assess which items are important to you and request that the sellers sign off on this before your option period is up. After that, you would lose a lot of negotiating leverage.
Response time – When will we hear something?
Sometimes, I have clients ask if they should put a “fuse” in the offer, which would make it valid only for a short period of time. Unless we are relatively sure that there is another offer coming or already in hand, I don’t recommend using this technique. On a typical offer, I would expect to hear something back within 24-48 hours, sometimes even faster. The longest that I can remember for an initial response was 4 days, but that only happened to me once.
What happens next?
The seller can choose to do one of three things with your offer:
Accept it with no changes
Reject it – this is pretty rare, unless you are competing with another offer
Give us a counteroffer – this is the most common outcome
After we negotiate and come to an agreement on your new home, you will want to set up the inspection as soon as you can. If there is a need for specialized inspections (septic, termite, etc.), we can help with that, too. You are welcome to use whomever you like for the inspection(s), and we can provide a list as well. You are not obligated to use anyone from our list.
Next step – INSPECTING THE HOUSE – I will post a link here once that has been written. 🙂