Ideas for Winning in a Competitive Market

Waive the Appraisal Contingency
Lenders require an appraisal of the property to determine the market value before approving the loan amount. This contingency provides an out for a buyer should the appraisal come in under the agreed upon sales price. To strengthen an offer, some buyers add specific language promising to pay in cash at the closing the discrepancy amount between a lower appraisal and the asking price, if any. This can ensure a higher than list price sale for the seller, while buyers can reduce their risk by limiting the amount they are willing to pay in cash.

Waive the Termination Option Period
Unique to the state of Texas, buyers typically pay a non-refundable option fee ($100-$200) to the sellers for the right to terminate the contract for any reason within a certain number of days after the effective date of an accepted contract. The option period gives a buyer time to have the property inspected and renegotiate their initial offer. Buyers have been known to waive their option period to strengthen their offer in a multiple bid situation. Despite waiving the option period, I do still strongly encourage buyers to perform an inspection so they understand the condition of the home they wish to purchase.

Typical Areas for Negotiation

Earnest Money: Earnest money is a form of a security deposit that demonstrates to the seller that you plan to purchase their home in good faith. Within three days of an offer’s mutual acceptance, the buyer will deposit the earnest money check with the title company, which is then deposited into an escrow account held jointly by the seller and buyer. Earnest payments vary greatly depending on the attractiveness of the home, the real estate market, etc. A typical earnest amount ranges from 1-2% of the sales price; however, some buyers offer more in multiple offer situations to show further confidence to the seller. Others offer less depending on their financial situation.

*Please Note: Check with your lender to confirm, but generally this deposit is applied to your closing costs or down payment when the transaction is final.

Survey: An approved professional home survey is required in Texas by the Title Company and your lender. The seller is required to furnish their existing survey within a contracted amount of time of mutual acceptance of the offer or pay to provide one. If the existing survey is not acceptable to the Title Company or lender, then a new survey shall be obtained. Who pays for a second survey, if needed, is an area of negotiation within the contract.

Residential Service Contract: Buyers may request that the seller purchase a one-year home warranty, typically ranging from $500 – $650 depending on the size of the home and policy, at the seller’s expense. While optional, Home Warranty Insurance, or Residential Service Contracts, can provide excellent protection against unexpected expenses associated with the repair and replacement of certain systems or appliances that fail due to normal use. The buyer may purchase this protection separately should they not wish the seller to incur the expense.

Important Areas to Note

Legal Names: Buyers should alert their REALTOR® to their legal names for the purpose of the residential home buying process. Couples who will be relying on a joint home loan must both be included as buyers on the contract for purchase.

Exclusions: Buyers who wish for a seller to remove an improvement (i.e., backyard shed, fence, aboveground pool) permanently affixed to the property or an accessory (i.e., window treatments, refrigerator) of the home that is the seller’s intent (i.e., listed on MLS) to be included with the home purchase, must include specific language for the removal of that item in the contract.

Sales Price: The contract will breakdown the buyer’s sales price as a sum of the cash being paid at closing (i.e., down payment) and, if any, the amount being financed through a loan.

Closing Date: The average closing time for a lender transaction ranges between 30 – 45 days from mutual acceptance. Typical days to avoid when setting this date are first and last days of each week (i.e., Monday & Friday) and month (i.e., 1st and 31st). Buyer flexibility on a closing date can be more attractive to a seller depending on their own personal situations.

*Please Note: Since the recent implementation of TILA-RESPA law, the closing timeline has increased. To avoid headaches associated with this change, REALTORS® have been encouraged to offer a three-day leaseback to prevent moving discrepancies, etc.. I’ll be happy to explain this in more detail should you have questions.

Property Condition: Buyers who wish for the seller to agree to specific repairs (i.e., foundation, roof replacement) before mutual acceptance of the home purchase is made, shall request they be done within this section.