This is a long post. However, it covers the entire process from your point of view and is considerably shorter than a standard purchase contract. Since it is a step-by-step process, you can read a little at a time.
As a licensed Texas REALTOR, I can help home buyers find and secure houses, complete residential contracts and negotiate repairs to turn a house into a home. In almost all instances, the seller compensates my consultation
and activity fees - not the buyer. Please call or text 214-862-7212 or
email me when you are ready for my help.
Buying a house is
exciting. It’s also a little overwhelming because it’s the biggest purchase
most people will make during their lifetime. I’m here to help. I’m on your side
of the transaction. I look out for your best interests. I’ve got your back.
I’ll be on the
lookout for problems, and I’ll do everything in my power to keep you safe
throughout the transaction. I’ll give you information about the market prices of
comparable properties. I’ll ensure everything goes smoothly and everything
stays on track. The mission is to get you moved into your ideal home with the
least stress on you. I’m on duty to make that happen.
Before we Meet
Prepare yourself to
buy a house before you start looking. You’ll probably need to finance part of
the home purchase. This means you’ll need to get your finances and paperwork in
order to apply for a loan. Please read my post, “
Your Credit Score and Options.”
If you’re selling a
home, there’s
much to do before you claim your equity and appreciation to buy
your next home. Please call, text or
email, and we can discuss some early
actions.
If you’re a
first-time buyer or don’t need to sell a property to purchase another property,
the next steps are the same.
You’ll want to save
money for your down payment and closing costs. Buyer closing costs - for all loan types – include lender fees, appraisal, attorney document fees, title fees, recording fees, prorated daily interest from the date they close to the first day of the following month, a full year of homeowner's insurance, initial escrow account setup (can be 3-4 months of taxes and insurance). Other fees may apply depending on loan type.
VA loans don’t require down payments, but there will be closing costs. There is also a one-time funding fee on all VA loans instead of mortgage insurance.
It is still good to pay any additional related expenses and pay a comfortable amount
of principal early to avoid interest on those funds.
Call, Text or Email
DFWmark
When you first
contact me about a home purchase, I’ll send you an invitation to my website
(
DFWmark.com). By creating a password, you’ll be able to save individual
properties or entire searches.
My website is tied
directly to the Multiple Listing Service (MLS). You’ll have access directly to
MLS listings at no cost to you. Unlike 3
rd-party websites - which can
be far behind the market –
DFWmark.com is “live.” If you see an active
property, it’s still active in the MLS.
If you want help
with getting a preapproval letter, I’ll help you talk to the lender of your choice.
Here are some trusted options. Otherwise, contact me once you have a
preapproval letter from your preferred lender.
I will send you this
state-mandated
Information About Brokerage Services form (this exact form). It explains how agency works in Texas and
lets you know the names and numbers of all my supervising brokers. My company
requires it to be initialed. It can be done in person with ink, but it’s better
to get digital initials because we will ensure the system works properly with
your preferred email address on your computer or smart phone.
Paperwork
Many lenders will want to see financial documents to preapprove borrowers. Please get your documents in order before you contact the lender to make the process move smoother.
Applicants will need photo identification (these include drivers licenses, passports, military identification and sometimes birth certificates). They will need several paycheck stubs as proof of employment and income. They will need several months of bank statements to show their down payment money is "seasoned" (has been in the bank for 60-90 days). If gift money is involved, it too must be documented and seasoned.
VA applicants will need all pages of their Certificate of Release or Discharge, also known as a DD-214 form. They will also need their
Certificate of Eligibility to secure a VA loan amount.
Applicants may also need documentation on the amounts they owe various lenders and proof they have paid off large-ticket items. Again, check with your lender to see what documents they will require.
Preapproval
By this point, you
should have a preapproval letter. You should have a dollar amount that you can
effectively handle from your lender. This is mostly based on your income, your
housing-expense-to-income ratio and your total-debt-service ratio. Different
kinds of loans require different ratio percentages.
FHA ratios tend to have a slightly higher allowance than conventional loans.
Total Debt Service
Ratio: The ratio of a borrower’s housing expense (Principal, Interest,
Taxes, and Insurance) and long-term debts to his or her gross income are used
to qualify applicants for loans.
The applicant's loan
preapproval amount helps determine the down payment amount. Depending on your
credit score, 3% or more will be the minimum down payment. However, 20% or more
lets you avoid paying Private Mortgage Insurance (PMI) for a conventional loan.
FHA loans have a Mortgage Insurance Premium (MIP), which is mortgage insurance for the entire length of the loan for most loans. Both “insurance
policies” only ensure the bank gets their money if you default – it protects no
property. There is no MIP or PMI requirements for VA loans.
There are a variety of options available through your lender to account for PMI. Talk to your lender to learn which option is best for your financial situation.
As a generic example, for a
$300,000 home, a conventional loan with great credit would require at least $15,000
down at 5%. To avoid PMI, it’s at least $60,000 down (20%) - easier to handle with the sale of
another home. Again, VA loans don’t require a down payment or mortgage
insurance.
Representation (Customer
or Client)
At this point, I’m
going to ask if you trust me.
If you don’t, I can
show you a few properties, but I’m only allowed to provide access with honesty
and fairness, but no professional advice.
If you do trust me, I’ll
ask you to sign a representation agreement with me. This allows me to become
your agent for a real estate transaction for a specified amount of time. You
gain my full fiduciary duties (obedience, loyalty, disclosure,
confidentiality, accounting, reasonable care and diligence) and representation.
I am not a lawyer,
and I am never allowed to give legal advice. So, read the agreement carefully
and consult a lawyer if you don’t understand it.
Because the
agreement is written by attorneys from the Texas Realtors association and
copyright is strictly enforced, I can’t post it online. If you’re considering
this agreement with me, please call, text or
email. I can send a secure version
for your consideration. Most Texas agents will use this same form.
Your Needs
You and I will
determine what your needs are. This is when you need a great agent. You’ll be
asked a long series of specific open-ended questions. This helps determine what
you need. The results might be quite different than you initially thought.
The home buying
process is a matter of elimination rather than addition. You will want to set
tight parameters and then eliminate everything that doesn’t work. The first
three issues are normally the same considerations used to price properties:
• Location
(where it is – city, community, schools, work, shopping, HOA status, etc.)
• Price (comparative
market analysis – to purchase, upgrade, maintain, etc.)
• Condition
(age, maintenance level, building materials, etc.)
First, you must
consider the type of home that fits your lifestyle best. Do you need a condo
above the cloud line, a lakefront estate or a tiny house at the edge of a horse
paddock?
Next, determine
where you want the home. Normal additional considerations are number of
bedrooms, number of bathrooms, living areas, dining areas, specialty rooms,
garage capacity, homeowner associations, and more.
If you’re buying a new house, the builders are normally selected first, then the development and
lot locations are considered based on the builder options. There are many more
questions here.
Custom builders are
the most expensive. They are also too complicated for this post.
Safety Matters
You will be asked to
provide a copy of your photo ID (scan or cell phone photo) before you see properties.
This is for the agent’s protection. If you know my background, you’re safer
with me than you would be with most other folks, but it’s still the common
practice to make this request. Your cooperation is appreciated.
Digital Options
After we determine
the basics of your home search, I will initiate an automated search in
addition to access to my website. This delivers new properties directly from
the MLS to your email inbox as often as you determine is best for you (monthly,
weekly, certain days, daily, twice daily or ASAP)
Tour Properties
Once I have
identification and a representation agreement, we can tour properties until you
find your ideal location. This is the fun part!
We can schedule a morning or afternoon to see the top five
houses on your list. Depending on how far apart the properties are, this won’t
take long. However, if you see more than five properties in one day, the
details will run together.
We will meet at the property or a neutral site. During the Covid-19 pandemic, I can't drive and tell buyers about the neighborhood like before. However, you can follow my SUV in your own auto.
Ideally, you’ll let me know which properties you want to
tour about 24 hours in advance, so I can verify the property is still accepting offers and make arrangements for you to see the
properties without the residents present.
After I’ve made arrangements, I’ll email a route and timetable to you for the
tour.
When we meet for the tour, I’ll provide MLS sheets of all
the properties you’ll see. If you’re already a Client, I’ll also provide any
sellers disclosures they have furnished and generate comparative market
analysis to help you make your decisions. If you are a Client, I will explain
the market conditions for the price range of the homes we tour and how this
affects the decision speed.
You Found “The One!”
This is great news! You walked in, and it was your ideal
home. Congratulations!
Let’s get it for you before someone else decides it should
be their home.
At this point, we can go to the office and start your
paperwork. First, you MUST be a Client. I can’t do any negotiation for
you or submit an offer without a representation agreement.
Next, based on the information I provided plus any other
factors you know, I will ask what you want to offer for the house. This is entirely your decision. I will ask
you questions about other terms of the contract until you are happy with the
total package you want to send to the seller.
Here is the list of possible documents I’ll prepare as part
of the offer:
o
1-4 Family residential, farm & ranch, new
home construction or condominium contract (TREC provides very similar
state-approved
examples of these)
o
Third Party Financing (loan contingency)
o
Contingency for Sale of Other Property
o
Addendum for Property Subject to HOA
o
Non-Realty Item Addendum (if you want to
negotiate other personal property)
o
Intermediary Relationship Notice (if the seller
is also with my brokerage)
o
Amendment(s) to Contract (these would be filed
later as needed)
Submit the Offer
As your
representative, I'll submit your offer through the seller’s agent. Do not
submit an offer unless you plan for it to be accepted. Digital documentation
means contracts could be resolved and executed within minutes for the right
offer.
Please allow me to
set the correct expectation here. We ALL want the same thing: we want the buyer
to buy the house they want and the seller to sell the house with a clean title.
There are no villains here. It’s a transaction.
Please remember that
“market value” is A) what a buyer is willing to pay AND B) what a seller is
willing to accept.
That said, I’ll try
to get the best deal for my Client and the other side will try to do the same.
There will be compromises on both sides by the time everything is done.
At this point, the
offer has been sent to the seller. The seller has three options:
• Accept
the offer “as is.”
• Reject
the offer completely.
• Counteroffer
(this is technically a rejection replaced with a different offer).
If the offer is accepted, celebrate and begin set up for
needed measures. (skip negotiations below)
Negotiations
Each counteroffer is
a negotiation point. It’s somewhat like tennis that can end quickly or last
several days. As long as there are counteroffers, negotiations continue. Each
counter is a complete rejection of the offer. Consequently, a new offer must be
made for each counter.
While this process
normally narrows the differences, any issues can be placed back on the table
throughout the process. Meanwhile other offers can be considered by the seller.
Continue this process until there is agreement. EVERYTHING
is negotiable in these transactions – even the goldfish. I will submit each
counteroffer to you for your approval, rejection or counter. The counteroffer
process continues until one side approves or rejects. I will try to
salvage offers before we get to rejection.
Offer is Executed
An offer is “executed” when accepted, signed by both parties and communicated to the other party and/or their representative agent. This is most often accomplished digitally now and can happen very quickly after acceptance.
I’ll need to collect the option fee and earnest money very quickly, or you can digitally transfer funds. Both amounts go to the title company. We need a receipt (paper or digital) to ensure contractual agreements are met and valid.
Payment must be in "good funds," which are cashier’s checks or similar secure banking funds. Cash will not be allowed in most transactions.
The process often is completed digitally. The Option Fee no longer goes directly to the seller as a check. Therefore, more sophisticated platforms like Earnnest (two "n"s) allow larger transfers of Option Fee and Earnest Money to title companies.
NEVER electronically transfer funds (wire transfer) without talking on the phone to the receiving party AND verifying all the routing information and amounts.
An Option Fee is a token amount (often $100 per $100K) paid to allow the buyer an agreed-upon number of days to terminate the contract FOR ANY REASON.
Mostly, the Option Period is intended to have professional inspectors and engineers (if needed) check the property for problems. The Option Fee is applied at closing. Otherwise, it’s completely forfeited to the seller if the buyer chooses not to move forward and terminates during the Option Period for any reason.
Pay it immediately! If payment is not received by the deadline, the Option isn't part of the contract, but the contract moves forward without this important safety measure. The contract is executed on "Day Zero." The following day is Day One.
The Option Fee and Earnest Money MUST be delivered to the title company within three calendar days of execution by 5 p.m. sharp - do NOT delay. If the third day falls on a day when the title company is closed (Sunday, holiday, extreme weather, etc.), it is due by 5 p.m. on the next business day.
Earnest Money is a larger amount of money (typically 1% of sale price) used as “liquidated damages.” Earnest Money is the sellers sole remedy to ensure the buyer fulfills promises. If the buyer closes on the house, the Earnest Money is applied at closing. If the buyer fails to fulfill promises, the seller can petition the title company to keep the Earnest Money as liquidated damages. Earnest Money is used by the title company for agreed-upon expenses such as HOA documents and the remainder is part of the down payment.
Steps Before Closing
(30-45 days unless some other time factor is involved)
Navigating the Inspection
I help my Client order and obtain an inspection. I
can’t request the inspection myself, but I provide a
list of trusted inspectors.
There are often discount coupons available from some inspectors. If you choose
an inspector, ask me if I have any coupons for them.
An inspection costs several hundred dollars and is non-refundable. This is paid by the buyer and is not reimbursed at closing. It varies depending on the size and complexity of the property being inspected. An inspection is suggested even for newly built properties. While it may cost a few hundred dollars, it can easily save a buyer thousands in unexpected repairs.
I will meet you at the property toward the end of the inspection time and get clarification from the inspector about what they see as problematic and some potential repair or maintenance issues.
You will get the report from the inspector since you paid for it. You will have the option to share the inspection report with me. If you choose to do so, I’ll analyze it for anything that is alarming. I will suggest some repairs for the seller to complete if it doesn’t impact the entire deal. The Buyer determines what repairs - if any - will be requested and what the Buyer will do after the purchase to ensure the home closes on time. The lender may have some additional say in the matter if appraisal and condition (by the licensed appraiser) is close to or less than the loan amount - particularly on VA and FHA loans.
If the inspection passes with minor issues, I'll write the
repair Attachment based on the instructions from my Client. I’ll follow up to ensure
any minor work is done before closing.
The repair Attachment is based on instructions from my Client.
It notes everything the Buyer requests the Seller to commit to repair before
the closing date. The Seller isn’t required to make any repairs, but normally
will make minor repairs. They'll also make some major repairs because having
been informed of the defects, they must now report these defects on the
Seller’s Disclosure if the Buyer terminates during the Option Period.
This is often determined by the financial status of the
Seller. If the Seller has no repair budget and a fixed income, don’t expect
repairs. However, the Buyer can ask for cash in lieu of repairs in these
circumstances.
If inspection fails. I’ll ask if the owner will make
corrections or offer repair funds.
If something specific fails that will be expensive to fix, I’ll
suggest the Client have a specialist inspect (electrical, plumbing, roofer, structural
engineer). Some additional trade professionals provide free assessment
inspections at the request of real estate agents if the inspection reveals something
unusual.
I’ll ensure that any agreed-upon repairs will be handled by
the seller or an agreed-upon compensation will be credited at closing. I’ll
ensure the agreed upon Amendment is signed, executed and filed at the title
company.
If Seller refuses to cooperate, I’ll see if Client still
wants the property “as is” or lesser amount. If not, I’ll submit a Notice of
Buyer’s Termination during the Option Period.
Again, everyone wants the same thing. We all want the sale
to happen if it can. However, sometimes, it’s best to leave the Option Fee with the Seller and walk away from a bad deal. The Buyer makes this
determination.
Between Option and Close
• I’ll help my Client secure a loan through their lender of choice. With my Client’s specific permission,
I’ll ensure lender will have the funds ready on time.
• I’ll send any executed amendments to the title company (even if other agents claim they will).
• If all works out during option period, I’ll schedule a walk-through date with Client no later than 3 days
prior to closing and ensure the property is ready for habitation by my Client. If so, I'll submit Buyer’s
Walk-Through form.
*** If required, I’ll negotiate differences between the contract price and the appraised value.
• I’ll complete and have Client sign Walk-Through and Acceptance Form.
• I’ll notify our concierge service to help Client be ready to move (present moving packet with lists of
movers, utility providers, moving tips, etc.)
Closing
I’ll attend closing to help Client if there’s a problem. Again, I will not offer any advice that's considered “legal.”
Types of Closing Funds
• Seasoned Funds are money that has sat in a bank account as savings or another secure location
for at least 60 to 90 days. This satisfied the government requirement against illicit funds. If funds
are not seasoned, they must be "sourced" or an investigation must take place as to the origin
of the funds. This is also true with "gifts" from friends and family.
• Good Funds are guaranteed to be available on demand. Traditionally, these are cashiers
checks. In modern real estate transactions, these are commonly wire transfers from one bank
to another.
• Cash is either forbidden or strongly discouraged in most real estate transactions.
When you're ready to move forward, I've Got Your Six!
Mark M. Hancock, GRI, MRP, AHWD
REALTOR, New Build certified
214-862-7212 (call or text )
