PREPARING AN OFFER

WHAT COMPRISES A SALES CONTRACT?

Your signed offer to purchase is the document which presents your price and terms to the seller. It will be prepared on a form promulgated by the Texas Real Estate Commission in conjunction with the Texas Bar Association. This purchase offer contains all the terms and conditions of the sale and if the seller signs it, the document then becomes binding on all parties.

The terms and conditions of each contract are unique. The following are some typical things that buyers and sellers negotiate:

•the sales price

•the amount of your “earnest money”

•the date, time and place of closing and when you will have possession of the home

•the Special Provisions paragraph will contain any terms or conditions which you or the seller will want to include in the purchase agreement.

Lissa will assist you in completing this document before it is submitted to the seller. The Termination Option is of utmost importance to the agreement. This is the paragraph that contains the buyers’ “unrestricted right to terminate” once the contract has been finalized or executed. It is during this “option period” that you will want to have all the inspections completed. This is your “due diligence” time, and you will need to complete you investigation of the home during this time. If, during the inspections, you determine deficiencies in the home that you want the seller to repair or you decide you want to, in any way, amend your offer, you will present an Amendment to the seller stating the amended terms of the contract. This opens the negotiations once again and the seller can agree in part or in whole to your “amended” terms, refuse to agree to your terms, or propose other terms for your consideration. It is important to understand that it is only you as the buyer who has the “unrestricted right to terminate” and therefore the buyer is the one who typically initiates any changes in the terms of the executed contract. At the end of the option period, unless you terminate the contract in writing, you will proceed to closing.

Finalizing The Agreement

The offer is finalized and becomes a binding contract only after the buyer and seller have initialed all changes and have signed the offer. When all parties have initialed all the changes and signed the contract, the “effective date” of the contract is the date filled in by the broker on the line just above the signatures. This date is the used to determine the timing of stipulations of the contract, such as the buyers credit approval or the option period. At the time the contract is “executed” ie., signed by all parties and dated by the broker, you will write a check for the earnest and option money made payable to the title company. The executed contract and the earnest and option money will be delivered to the title company who will then receipt the contract. The earnest money will be deposited in an escrow account and will be credited toward your closing costs at closing. The title company will also receipt the contract for the option money. If the seller agrees, the amount of that option money check will also be a credit to you at closing.

Inspections

During the Option Period, you will want to hire a property inspector licensed by the State of Texas to perform a structural and mechanical inspection of the home. At the conclusion of the inspection you will be given a report on a standardize form approved by the Texas Real Estate Commission. It is important to be present for the summary report so that you get the information from the inspector first hand. You will also want to hire an inspector for wood destroying insects. Depending on the property inspection report, you may want to hire a structural engineer to perform a further investigation or possibly a roofer, or another specialist. You’ll want to compete all your investigations, and if you choose to submit an Amendment to the seller requesting repairs or amending the sales price, you’ll want to do that at least two days before the option period expires. The seller will need time to respond to your Amendment before the expiration of the option period. Your unrestricted right to terminate the contract ends when the option period expires.

Appraisal

If you are applying for mortgage financing to purchase the home, the mortgage company will hire an independent fee appraiser to determine the opinion of value for the home for the mortgage company. The tax appraisal value is the assessed value for property taxes but does not establish market value. The mortgage company is agreeing to lend you a percentage of the appraised or market value of the home. So, it is essential that the home appraise for at least the amount of the sales price.

Survey

The title company or your lender will order a survey of the property on your behalf. A surveyor determines the exact dimensions of the land and the specific location of the home, garage, patio or deck, fences, pool etc. on the lot and provides a line drawing of the property. Using the title commitment, the surveyor also specifies any easements, encroachments, setback and/or building lines, etc. which are filed with the county. Those are located on the land and described on the survey. The lender and the title company review the survey for potential problems.