H O M E
B U Y I N G
B A S I C S
AUSTIN, TEXAS
I F
Y O U
A R E
THINKING ABOUT PURCHASING A HOME IN
AUSTIN, TEXAS
THIS BOOK IS FOR YOU.
Different states have different laws, forms, and guidelines. Even if you have bought or sold a home in another state, you may not have a clear idea of what that process will look like here in Austin. We compiled a list of our previous clients' most-asked questions and created this guide to help you navigate your Texas home purchase. We want you to use us as your personal Texas real estate resource. We make it our priority to stay up-to-date with the latest news about the market, interest rates, and trends to ensure our clients are entirely informed. It is our honor to advise you. Please give us a call, send us an email, or stop by the office any time. We are here for you when you need us.
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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US
WHY CHOOSE
We realize that you might know several real estate professionals. Choosing the best person to work with can be a challenge. It is important to remember that your RealtorÂŽ will be the one who guides you through the buying process. Having access to knowledge, a professional real estate network, and master negotiating skills in this market can make the difference between getting the home that you want for the right price and not. The Austin market currently moves rapidly. Take it from us; you need every available tool at your disposal. Everything from the size of your agent's team, to the broker they represent, the years of collective expertise they can access, and who they have in their network, can make a huge difference in your overall outcome and your home buying journey. SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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IT'S ABOUT
WHO WE ARE
At Schmitz & Smith Group, we have over 40 years of collective experience. We've seen a lot - and we know what to do. We have knowledge in all segments of the market from buying and selling multi-million dollar luxury homes, to helping first-time home buyers navigate their purchase. We've helped clients buy and sell ranch land and lots, negotiated with builders, and helped clients with new home construction projects. We know historic buildings, downtown condos, and more. Working with a team from KW - Austin Portfolio Real Estate comes with benefits. It allows us to offer a boutique, luxury experience with the benefits of being backed by the largest broker in the country and that positions us to help you secure your home at the best possible price.
WE BELIEVE LUXURY IS NOT DEFINED BY PRICE, BUT BY THE QUALITY OF THE SERVICE WE OFFER.
If we ever find an issue we haven't previously encountered, we know exactly who to call. Need a creative financing solution? Looking for a builder to make your dream house from scratch? We know people all over Austin in the real estate industry. We can make recommendations that can help you build your home-buying dream team of tenured professionals so that you can rest assured every detail has been assessed and you are making the best, most educated buying decision possible.
AND ALSO
WHO WE KNOW SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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FINDING Y O U R
N E X T
HOME
W
e know you can find lots of listings on sites like Realtor.com, Zillow, Trulia, Redfin, and Hotpads. In fact, research tells us that you have probably been looking for homes on at least one of these services in the last six months. The only problem we have with these sites is that many of the listings can be inaccurate or outdated. We prefer that you look at the most live and accurate data available on the MLS.
We initiate an initial discovery period with our clients. We will work with you to learn exactly what you want to spend, and even determine some standards and criteria that you might not have thought of yet. It is important to us that we do our due diligence to be sure that you are well-informed about what is available to you before you make an offer. Using our customizable home-searching tool (a live feed from the MLS, the source of all home listing information on the web), we’ll create a private online portal for you where we can interact together. You will get daily updates on new listings directly from the MLS, and we’ll show you how to adjust the search criteria at your will, mark your favorite homes, and ditch property listings that you dislike. We’ll show you how we can leave comments for each other inside the platform and create a process as collaborative as you want it to be. Learning all of your preferences helps us keep an eye out for properties that that are not yet officially on the market, allowing us to show you these properties before they are listed on the MLS. If you are interested in a home that’s “for sale by owner” - especially if the seller is a friend or colleague - let us make the call and manage negotiations on your behalf. It is proven that your outcome will be better than if you try to manage it yourself. We will tour property with you until you find your next home. Then we’ll make the offer. Once you are under contract, we will keep you informed of all the important dates and deadlines that you are obligated to abide by in the contract and keep the process moving forward.
HOME LOANS
T H E
B A S I C S
Understanding how home loans work and getting pre-approved will set you up for success in the home buying process.
F I X E D
R A T E
Small Conventional Loans Under $453,100
L O A N S
Jumbo Conventional Loans Over $453,100
Federal Housing Administration (FHA) Veterans Affairs (VA) Makes ownership more affordable with less Takes away the need for a down payment without down and easier credit requirements. Limits vary the risk of PMI. Only available to veterans. by county (speak with your lender to learn more).
A D J U S T A B L E
R A T E
L O A N S
Adjustable Rate Mortgage (ARM) These rates start out lower than any other option, but fluctuate with the market. SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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WRITING YOUR BEST
OFFER WHAT TO
EXPECT
THERE ARE SEVERAL THINGS WE EXPLORE TOGETHER PRIOR TO FORMULATING YOUR OFFER.
W E ' L L E X P LO R E YO U R N E E D S • Closing costs such as title, escrow, and lender fees usually cost between 1-3% of the sales price. • Do you need any seller concessions (seller paid closing costs that come from the cash proceeds of the sale)?
W E ' L L A N A LY Z E T H E L I S T I N G P R I C E • What other homes are for sale in the neighborhood? • What is the price per square foot of comparable homes that have recently sold in the area? • How long has this property been on the market?
W E ' L L A D V I S E Y O U I F M U LT I P L E O F F E R S H A P P E N Please understand this is not uncommon when homes are priced right for the market and are in great condition. When this happens, a seller will pick one offer, and then exclusively work with that buyer. We will work with the listing agent to gather info on the seller and help you present your best and final offer. This is an area where a local lender really helps your case. We can arrange for your local lender to reach out to the listing agent on the property you have made an offer on, to make sure that they understand how strong your mortgage application is. SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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KEYS to a STRONG OFFER
HAVE A PRE-APPROVAL LETTER FROM A LOCAL LENDER It’s important that you have a reasonable expectation of what you can afford and how quickly you can close.
THAT DOWN PAYMENT The larger the down payment, the stronger your offer. It's a clear way to communicate to the seller that you have room to make decisions should funding issues arise.
CONTINGENCIES COMPLICATE We’re not saying you can’t have a contingency to close a deal, but we are saying that a sure deal is more appealing than one that hinges on the sale of another property.
EARNEST MONEY This is typically 1% of the total sale price and it is held in an escrow account by the title company until the contract is terminated, or until it is applied to the purchase price at closing. In multiple offer situations, sellers may ask for more earnest money to be put down at the time the contract is signed.
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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TEXAS HOME BUYING
FAQ's W H A T I S O P T I O N
A N P E R I O D ?
One distinctive feature of the Texas residential real estate contract forms is the “termination option” or “the option period.” The termination option paragraph of a contract gives a potential buyer, in return for paying an “option fee” to the seller, the unrestricted right to terminate the contract by giving notice of termination to the seller within a certain number of days after the effective date of the negotiated contract. The number of days and the amount of the option fee are negotiated between a seller and a potential buyer in the sales contract (typically between 7-10 days). In Austin, option fees typically range from $100 to $500. Option fees are paid directly to the Seller and are non-refundable, but those funds are typically applied to the purchase price, unless specifically stated otherwise in the contract of sale. The termination option is popular among home buyers in Texas, because it gives a potential buyer time to fully evaluate the condition of the property and perhaps renegotiate the initial offer based on inspections, needed repairs, or other considerations. The seller is not obligated to accept any agreement beyond that of the initial contract, however we find that they are typically open to negotiating repairs when the problem is one that the next buyer will likely also contest. Often the negotiations that take place during the option period end in a reduced sale price, credit towards closing costs, or repairs being remedied prior to the close of the home.
E A R N E S T
M O N E Y
E X P L A I N E D
In real estate transactions, the earnest money is a deposit made by the buyer into a trust or escrow account. Earnest money is used to show the seller that the buyer has entered into the transaction in good faith. The funds will be held by the title company in a non-interest bearing escrow account throughout the time you are in contract on a home purchase. Earnest money is refundable to a buyer unless they default on the contract of sale.
TEXAS HOME BUYING
W H A T
I S
A
H O M E
FAQ's
A P P R A I S A L ?
The bank requires properties be officially appraised to determine their market value. The results of that appraisal determine the amount they will loan a buyer to purchase a specific property. The lender will hire the appraiser to come out to the home and visually inspect it for improvements or deficiencies that may impact the market value. In addition, the appraiser will consider the location, square footage, and selling prices of similarly sized and located homes. The home appraiser will usually address conditions that are apparent or observable. Unlike a home inspector, an appraiser does not test mechanical systems and major appliances. The appraisal helps the lender determine if the agreed upon sale price is supported by recent comparable sales and determines how much the lender is willing to lend against the home. As a buyer, you are entitled to receive a copy of the appraisal. In environments where we see rapidly increasing home prices (like Austin), the appraisal results may not support the price that we have agreed upon with a seller. When this happens, the lender may require you to make a larger down payment or suggest a different loan program that allows for a mortgage at a higher percentage of the sale price. We can also go back to the seller and renegotiate the sales price. Note that while the lender orders the appraisal, the buyer pays for it, usually early on in the official mortgage application process. An average appraisal can run $500.
D O I R E A L L Y N E E D T O A H O M E I N S P E C T I O N ?
P A Y
F O R
Though not required, a home inspection is a valuable tool to home buyers. An average inspection in Austin runs $457 and can take three or four hours to complete. Your home inspector will focus on evaluating the overall condition of your future home, paying close attention to structural deficiencies and mechanical systems such as plumbing, electrical, heating and cooling as well as major appliances. An inspection report should locate any repairs that need to be made and determine if there are any health or safety concerns in the home. Be aware, however, that an inspection is not a warranty and there’s no guarantee it will find all problems with a property. A Schmitz & Smith Group member will be present at your inspection. Together, we will go over the inspection report and review the narrative accounts of the inspector’s findings along with their pictures and diagrams. If the issues are major, we may choose to use the report to renegotiate your original offer for the house before the option period expires. Please note that home inspections are general “catch all” assessments of the condition of a home. If serious deficiencies are discovered, you may choose to have additional system-specific inspections done. For example, if foundation issues are discovered by the inspector, we may suggest that you have the slab inspected by an engineer who can provide a written report of the condition of the foundation with an itemized cost-to-repair quote. We can then take that expert-written proof and the list of associated costs to remedy the issue(s) back to the seller to negotiate for the needed repairs.
FINDING Y O U R
N E X T
HOME T A K E
T H E
Q U I Z
Our goal is to help you find the perfect home and to make the moving process go as smoothly as possible. To help us do that, we’ve put together the following questionnaire to help us to get to know each other:
A B O U T First Name
Y O U
Middle Initial
Last Name
State
Zip Code
Mailing Address
City
Primary Phone Number
Home Phone Number
Work Phone Number
Primary Email Address
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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A B O U T
Y O U R
L I F E S T Y L E
What do you do for work? Where is it located?
Tell us about your family.
If you could live anywhere in the world, where would it be? Why?
Do you currently Rent
Own
How long have you lived at your current residence?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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P R E V I O U S
H O M E
O W N E R S H I P
Please skip this section if it does not apply to you
How many homes have you owned?
Have you recently bought any real estate in Texas?
Are you able to buy another home without selling your current home? Yes
No
Would you like to buy or sell first? Buy First
Sell First
Would you be more comfortable: Owning multiple homes
Owning one home
How did you start looking when you bought your last home?
Did anyone assist you in making the decisions?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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Describe your process the last time you bought a house. What did you do first? What were the steps you went through?
From start to finish, about how long did the whole process take until you found the house that you purchased?
Did that process work well for you?
Are you comfortable (more or less) using that same process to purchase your next home?
Is there anything about that process that you would do differently if you had to do it over?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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Y O U R
C U R R E N T
R E S I D E N C E
What about your current residence do you like the most? Why?
What do you like the least about it? Why?
Which room is your favorite? Why?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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Y O U R
N E W
H O M E
What size home do you have in mind? Why?
What style of home do you have in mind? Why?
What three features can you not live without? Why?
Of all the things that buying a new home will accomplish, which will be the most important?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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Do you have any special furniture that you would like to accommodate?
How do you feel about doing your own home repairs or decorating?
How do you feel about buying a brand new home/townhouse?
Are there any special requirements for anyone who will be living in the home? (Hobbies, schools, pets, etc.)
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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Y O U R
T I M E L I N E
When would you like to move?
Why is that time frame important for you?
If we found your perfect home today, what would you do?
Is there anything we need to resolve before you purchase a home?
Will anyone else be involved in the purchase decision?
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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F I N A N C I A L
I N F O R M A T I O N
What price range did you have in mind?
How did you decide on that amount?
How much over that amount would you be willing to go if we found a home that was very appealing to you? (This information is important for us as we develop search criteria)
Will anyone be offering financial assistance?
Will you be financing part of the purchase? Or will you be paying cash?
If you will be financing, have you met with a lender? Yes
No
Were you pre-approved for a loan? Yes
No
SCHMITZ & SMITH GROUP KW - AUSTIN PORTFOLIO REAL ESTATE WWW.SCHMITZANDSMITH.COM | 512-794-6700
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