John's Blog

Disappear When Showing Home

John Watts (Keller Williams Realty) — Tue, 01 Dec 2009 07:23:55 -0600

After you put your home on the market, it is extremely important to be flexible about allowing potential buyers to view your home. Another aspect when showing your home is to do the disappearing act, this means leave your property. If the buyer shows up on your doorstep, be sure the buyer is accompany by a real estate agent and do not give them free access to home. Leave the property and require the real estate agent to enter the home using the lockbox procedure after have left your home. By leaving the property, this makes the potential buyer feel like he and/or she are not intruding and provides them a better opportunity to evaluate your home. If they are truly interested in your home they probably will stay longer which works out to your advantage for the seller. If it is absolutely necessary you stay in the home, go to an out-of-way area allowing maximum privacy to the buyer. If the buyer asks questions, refer all questions to your realtor. Normally, in this environment, the buyer is feeling you out, trying to determine how much to offer for the home. This is the realtor's job to answer all questions and do the negotiating his or her client.

Pros and Cons Condo Ownership

John Watts (Keller Williams Realty) — Mon, 23 Nov 2009 18:20:39 -0600

There are some home buyers who are not sure what the benefits and disadvantages of owning a condo. First, I will list some of the benefits of condo ownership:

• No exterior maintenance, such as, mowing the yard and painting the exterior of their home.

• More free time for the homeowner.

• Condos may provide amenities, such as, swimming pool, fitness room, and clubhouse for holding parties.

• Condo ownership allows homeowner to take advantage of tax savings. Interest paid on home loan and property taxes can be deducted on your federal income taxes.

• Benefits can be realized from appreciation of the property.

Now I will list some of the disadvantages to owning a condo:

• Will incur association fees for maintenance and updating the property.

• May not have as much privacy as you would experience in a detached home.

• Probably will have little input in landscaping choices.

• Will be living in close proximity to your neighbors.

In final analysis it becomes a personal choice, but buyers need to be aware of the pros and cons of condo ownership.

Home Mortgage Term

John Watts (Keller Williams Realty) — Mon, 16 Nov 2009 19:21:37 -0600

Many buyers of property ask themselves, what are the advantages and disadvantages of a shorter term versus a longer term mortgage. This also may apply to refinancing your home. Accepting a short term mortgage, such as, 15 year term allows the homeowners to pay off their mortgage in a shorter period of time, and usually gets a slightly better interest rate. On the other hand, this approach may create some potential problems for the homeowner. The problems could be caused by some unfortunate event happening in their lives, such as, illness or loss of job. If this were to occur, it would create greater stress in meeting your home mortgage obligations. Something to think about, it is possible to reduce the severity by agreeing to a longer term mortgage, such as, 30 year term. Using a 30 year mortgage, it is possible to achieve the same results as a 15 year mortgage by making a monthly additional principal only payment. If an unfortunate event occurs the homeowners is not required to make the extra principal payment, thus giving the buyer extra time go get through a difficult period. If on the other hand, you can afford higher monthly mortgage payments without potentially creating greater family stress, does not allow you to forego investment in your retirement, or prevents you from living your desired lifestyle, then it makes sense to have 15 year mortgage, otherwise, it does not make sense.

Buyer’s Read Seller’s Disclosure

John Watts (Keller Williams Realty) — Mon, 09 Nov 2009 15:08:16 -0600

As a buyer of property, be sure you read and understand the contents of the Seller's Disclosure prior to finalizing the sales price. Sellers in most situations are required to provide a Seller's Disclosure Document that defines the real property items to be conveyed. In addition, this Document will define defects in the property that significantly affect the value, desirability, safety and habitability of the property. After reviewing the Document, do not be afraid to ask questions, and do more investigation. If necessary hire a professional for the area(s) of concern. A professional, should always give their response in writing. This is very important, allows the buyer to have greater control in the negotiating the final sales price. The above review and agreement on sales price must be completed prior to acceptance of the offer, or in the earlier stages closing process after the acceptance of the initial offer. The rules governing this may vary depending on the transaction state. Therefore, speak with a realtor for proper advice per your situation.

Seller’s Response to Offer

John Watts (Keller Williams Realty) — Mon, 02 Nov 2009 18:18:21 -0600

Have you ever submitted an offer to purchase a property in which the seller did not respond? This is an occurrence that has happen to some buyers. Some buyers believe a seller is to respond to all offers in the order they are received, or required to respond to an offer within a set time frame, such as 24 or 48 hours. The fact is, the seller is neither required to review or respond to any offers. Non-response normally occurs when there is a low offer, or when the seller has received multiply offers. As a buyer, you may want to give the seller a deadline date to respond to your offer, or after a reasonable period time, give a written notice that you are withdrawing your offer. Communicate with your realtor on how best to handle this situation per your given circumstance.

Trees Are Import Asset

John Watts (Keller Williams Realty) — Thu, 29 Oct 2009 20:33:07 -0500

Many times buyers forget to think about the added value trees make to a home. Buyer's, usually thinks about the kitchen, living space, air-conditioner, furnace and roof, but forgets about the outside, especially trees. Trees, will affect the property value in the following ways: by the size of the trees, type of trees, condition of the trees and location of the trees based their aesthetic and functional purposes. Homeowners, find trees to be a wise investment because they generate greater value than a non-landscaped property. With today's rising energy costs, trees will save energy by protecting your home from the heat and reducing cooling requirements. A well protected home may be able to save as much as 10% on the electrical bill versus a non-protected home. Remember, trees also protect in the winter from wind by acting as a windbreak. Knowing some of the benefits of trees, there is also maintenance issues and knowing how to properly place trees. Depending on the type of tree, they all spread out underground, as well as above ground, therefore, proper placement of new trees in your lot is important. Finally, tree maintenance is always important, keeping them properly trimmed is necessary to realize the greatest benefits. Even with the extra work and expense required with having trees, they still add value to your property while you are living in your home, as well as for resale.

Selecting Your Neighborhood

John Watts (Keller Williams Realty) — Mon, 26 Oct 2009 16:42:18 -0500

After making the decision to purchase a new home, then comes one of the most important decisions in the buying process, selecting the neighborhood that fits your lifestyle and desires. As a home buyer, there are many things you must take into consideration, such as: if you have school age children, then schools and area amenities for children are important, and many buyers without children think it is important to purchase in a good school district for resale purposes. Another area of concern to buyers is crime statistics and the presents of sex offenders in the neighborhood. There are tools for the buyers to use such as, sex offender data bases that buyers can access, being a friend with a police officer who can provide you crime information and area crime statistics that are available on the internet. Another area of concern for many home buyers is transportation issues, distance they must drive for daily errands, commute to work and the availability of public transportation. Other buyers priority, may include being near healthcare facilities, shopping centers and/or restaurants. The main point here is, each buyer should determine their list of priorities and rank them per their desires. In most situations, the buyer will not find all the neighborhoods will meet their home search desire criteria. At this point, then the buyer should restrict home search to the neighborhoods that meet all or most of their desires.

Buyer’s Beware of Assumptions

John Watts (Keller Williams Realty) — Mon, 19 Oct 2009 10:28:00 -0500

Buyers when purchasing property will have many opportunities to make assumptions that appear to be safe on the surface. For example, the home may appear to be in great shape with no problems, such as, termite damage, chimney problems or other expensive defects that are not obvious. Even new homes may have problems that only a professional can identify. Making the wrong assumption and not verifying your assumption with a professional may cost you several hundred or even thousands of dollars. Always, hire an inspector to verify the condition of home. In some situations, it will be necessary to hire an inspector that specializes in particular areas such as: termites and crack foundations, etc. Another area that a buyer should be careful not to make an incorrect assumptions, deals with some facets of the closing process. Most buyers do not totally understand this process. This portion of the closing process is normally being handled by a mortgage broker and a title company. If you have questions or concerns, be sure to ask questions. This is another area where your realtor can offer you great assistance and give you peace of mind.

Home Inspection

John Watts (Keller Williams Realty) — Mon, 12 Oct 2009 18:44:59 -0500

After your offer has been accepted by the seller to purchase your new home, then comes one of the most important steps in the buying process. This step is the home inspection; this should be the first major task that is completed after the accepted offer. Prior to reaching this point of the buying processed the buyer and realtor should have had a discussion and identified who will be hired to perform the inspection. This is important to avoid delays in the remaining tasks that must completed in the closing the process. Be sure to hire a component inspector who will evaluate the property honestly and neutrally. The inspector should be recording his findings immediately and taking photos to support the recorded text. In my opinion, the inspector should develop and provide the buyer a copy of the inspection report before he leaves the property. In addition, before the inspector leaves the property the buyer and realtor should be present at the site to review in detail the results of the inspection. In this way, if the buyer and/or realtor do not understand a portion of the report, they have an immediate opportunity to review the affected area for clarification. This is extremely important, in order to make the correct decisions concerning repair cost and who should complete the repairs. Normally, in this situation, the realtor and the buyer should be most concern about the big ticket items such as; damage roof and foundation, etc. If you are buying a foreclosure, most likely the buyer has to make the decision whether to accept the property as is, or terminate the contract and move onto another property.

Inspect New Home Construction

John Watts (Keller Williams Realty) — Sat, 10 Oct 2009 07:58:50 -0500

Many buyers do not realize the importance of having a third party inspection on new home construction. These people fall into the trap that the builder provides home and appliances warranties with their new construction. This is true; there are warranties for construction of home and appliances that are included by the builder. There are builders that do an excellent job, but unfortunately there are builders whose quality of work is less than satisfactory. Many times builder's construction errors will outlast the warranty period provided by the builder. The buyer needs to provide themselves greater protection for their largest investment; I recommend buyers seriously consider having a third party inspection. There are two types of inspections: first, buying a spec home where the construction is already completed. Here, the buyer should select their own inspector and have this inspector do a one-phase inspection of the property. Second, buying a home to be constructed on an empty lot, recommend 3 to 6 phase inspection as the home is being built. This requires your inspector to make multiple trips to the property in order to insure quality construction. In finally analyst, this adds additional cost to your project, but may save you money in the future.

Understanding Home Warranties

John Watts (Keller Williams Realty) — Fri, 02 Oct 2009 19:01:29 -0500

Many times when I speak with a potential home buyer, they have neither heard of or understand the protection a home warranty provides to a homeowner. A home warranty is an insurance policy that provides financial reimbursement for equipment failure within the home. The policy will provide protection to such household items as: water heater, air conditioner and cooking range, etc. When there is equipment failure the provider will evaluate the failed equipment to determine if the appliance can be fixed. If it cannot be repaired, usually the policy will pay for a replacement including installation. Some states request the seller to pay the premium for the first year. After the first term, the homeowner can renew the policy for continuous coverage. These policies normally offer different levels of coverage in which buyer/homeowner can choose from. Most policies offer a one year term, costing from $250 to $600, depending on the options and level of coverage. In final analysis, the home warranty is a plus for both the seller and buyer. This allows the seller to assure the buyer that all appliances are in working condition and willing to provide financial assistance in case of equipment failure.

Costs Associated With Selling

John Watts (Keller Williams Realty) — Fri, 25 Sep 2009 12:26:09 -0500

When purchasing your new home, it is wise to have a general idea how long you plan on living in the home. In addition, you need to provide yourself financial protection for unexpected emergencies, such as, loss of job or illness. Finally, it is important to understand the cost associated with selling a home; unfortunately many home buyers do not understand this side of the equation or fail to take it into consideration when purchasing property. Recently, many buyers of homes have experience the need to sell their home for various reasons, but unfortunately they do not have sufficient equity in their home, or available cash to go the closing table. This leads to foreclosure, bankruptcy, and destroying their credit rating. As a buyer, you need to be aware of the cost associated with selling your home. Your closing costs are going to be approximately 8-9% of the sold price. In addition, to the closing costs the seller must pay off any outstanding mortgage amounts and pro-rated property taxes. The closing costs usually include the following:

• Title insurance; protect the buyer so the title to the property is free of liens and encumbrances.

• Some areas it is customary the seller pays for pest inspections.

• On VA, FHA and conventional loans discount points may be paid by seller, but usually paid by buyer.

• Attorney, courier and other miscellaneous fees

• Property taxes and insurance premiums are usually collect in advance by your mortgage company. Seller's pro-rated property taxes are collect at closing. After closing the seller can recoup any unused insurance premiums and property taxes from their mortgage company.

• Broker's fees.

Are You Ready To Buy?

John Watts (Keller Williams Realty) — Mon, 21 Sep 2009 18:21:01 -0500

If you are ready to purchase a new home, it is extremely important to be prepared to make a quick offer. By making a quick offer does not necessarily mean you are trying to achieve a quick end to the transaction. Having the capability of making a quick offer means you have been pre-approved by a lender or you are a cash buyer who has a funds available statement from the buyer's financial institution. In addition, your realtor should provide a service to immediately notify the buyer of any new properties that become available per buyer's home search criteria. The reason this is important, it will reduce the possibility the buyer getting into a multiple offer environment for the same property. Multiple offers are good for the seller, but usually bad for the buyer, because it tends to drive up the price to be paid for the home. As a buyer, remember normally within the contract you are given a set number of days to evaluate your new purchase and the capability to resend the contract without serious financial loss. During this time, be sure to evaluate the condition of the property, get a quote on insurance, and evaluate the cost of utilities. In final analysis, sometimes it is necessary to make quick decisions in order to get the right property for yourself, but be sure you understand your contract before you start this transaction process in order to prevent yourself from serious financial lost.

ADV: Lot Located Near Lake Travis

John Watts (Keller Williams Realty) — Mon, 14 Sep 2009 14:19:55 -0500

As a buyer purchasing property such as a home, it is extremely important that you have a system in place that will provide you a hard copy paper trail of all documents, e-mails and phone conversations that occur during the transaction. Today, many buyers are using an electronic filing system, since most realtors, lenders and title companies are communication by e-mail. The advantages of using this method are: spend, easier and requires less space. Each real estate transaction will generate many pages of documentation. The closing, which normally occurs at a title company or a lawyer's office, will generate the largest single volume of documentation. The buyer is required to initial and/or sign most pages. The closing office of the transaction will normally bind all this paper into an organize booklet for your permanent records. You may want to scan this document into an electronic file in order to have a backup to your hard copy document. This would combine closing documentation with all your other documents generated prior to closing. No matter what procedure you chose to use, be sure both your electronic and hard copies are retain in a safe place, and you know exactly where the documents are located at all times. In the future, it will be necessary to refer to these documents when selling your home, and will need them for tax purposes.

Homeowners Insurance Is Necessary

John Watts (Keller Williams Realty) — Mon, 31 Aug 2009 19:42:41 -0500

Some new homeowners are overwhelmed with the closing cost and down payments when purchasing their new home. As a homeowner, there are a number of additional expenses they will be required to pay, such as, maintenance and insurance, etc. Most home buyers do not pay 100% cash for their new home; therefore, will be required by the lender to purchase some sort of dwelling fire or homeowner's policy. When you shop for homeowners insurance, you need to be aware there are many different types of policies with different levels of coverage for the homeowner. The homeowner has a choice of how much self-insurance they are willing to assume, which is defined by the deductible. Deductibles are normally defined as a total dollar amount, or a percentage of total amount coverage within the policy. As policyholder, you will be required to pay the deductible amount for each claim occurrence. It is important for the buyer to understand this concept and your exposure in case of a claim. Another aspect concerning insurance, a buyer needs to understand, is how to read a homeowner's policy. There is an easy way to remember how this is done; remember the word DICE. The ‘D' stands for declaration which usually is the first page of the policy defining your coverage and amount of premium you must pay. The ‘I' stands for the insuring agreement section; this defines all the coverage that is available. Next, refer to letter ‘E', this defines the exception section within the insurance policy. This is the most important section; the insuring agreement gives you the coverage, and exception section takes the coverage away. Therefore, if the coverage is taken away in this section, you do not have coverage for that peril. Finally, the letter ‘C'; this is the condition section. This section defines how the claimant should cooperate with the insurance company during a claim.

Protect Valuable Possessions

John Watts (Keller Williams Realty) — Fri, 28 Aug 2009 19:43:25 -0500

Prior to putting your home on the market you need to identify your most valuable possessions and their location. Following is a list of some the valuable property a seller may have in their possession: diamonds, gold, grandmother's pearls, firearms, prescription medicine, mail, bills, insurance information, bank statements, blank checks, offers of credit, other personal mail that would used by a criminal to assume your identity, birth certificates, passports, and social security cards, etc. Be sure to identify the location of the above items, and take the necessary steps to place these items in a safe lock environment. In some situations, some of the items should be removed from current environment and placed in a secure off-site location. Do not leave any of the above items either in unlock drawers or easily visible to potential buyers when touring the property. A seller should not expect the real estate agent to protect his property in all situations. There are situations when an agent is showing the property with potential buyers, he/she cannot view or hear everything that is occurring on the property. As a seller, unfortunately, you have to realize the fact there are dishonest people who will do identity or hard property theft if you provided the opportunity.

Become a Landlord

John Watts (Keller Williams Realty) — Mon, 24 Aug 2009 12:43:39 -0500

Owning rental property is an excellent way to accumulate wealth. It requires desire, skills, and financial means to be successful in this business. If you are considering becoming an investor and renting property it is a good time to start. First, you need to talk to other investors and realtors to learn the pros and cons of purchasing rental property. Develop a business plan that stresses reasonable return on investment and future growth. Your business plan should include a slow start that allows you to learn the business and provides an opportunity to make adjustments to prevent large financial losses. As an investor, you need to do research to determine neighborhoods where home values are consistently growing, and there is a steady stream of tenants. This needs to be an on-going process, because some neighborhoods may either level off or begin to show a downward trend over time. When renting a house it is important to keep tenants in the property, receive sufficient rent to cover your expenses, which includes, mortgage, taxes, insurance and maintenance. If you can break even, you can enjoy tax breaks and profit from appreciation of the property. If your property is appreciating, this is a strong indicator, the rent payments you receive, will continue to increase. Concerning insurance, coverage should include dwelling coverage, and landlord insurance to protect you from loss of income in the event the property becomes uninhabitable, or during a tenant/landlord dispute. Finally, consider hiring a property management company, especially if you are not located close to the property. A good property management company can screen tenants, collect rent, inspect and maintain the property.

Home Will Not Sell

John Watts (Keller Williams Realty) — Fri, 21 Aug 2009 13:44:32 -0500

As a seller there are 3 main reasons why homes do not sell quickly. Therefore, it is important that the seller be familiar with these reasons and make adjustments in their presentation, marketing and listing price to compensate for these factors. The first reason why some homes stay on the market is over pricing of the property. It is extremely important that a good comparative market analysis (CMA) is done on the property. Be sure the CMA only includes homes within the same neighborhood, similar in square footage and number of stories. If these minimum requirements are not included in the CMA, there is a strong likelihood the recommended listing price will be incorrect. If the above factors are not included, your starting listing price may be either high or low depending on the situation. The second reason, many buyers want to buy a home in top condition. As a seller, you need to play the role of a buyer, being very critical and asking yourself if you would buy this home and why. If the answer is no, you probably need to make some improvements, such as, painting, updating lights, plumbing features, removing clutter, and/or improving curb appeal, etc. Finally, the third reason is location; this could be due to undesirable schools, crime rate, busy roads and/or noise in the area. The best way to compensate for this situation is to lower listing price and/or offering more favorable financing terms. Financing terms could include some sort of interest rate buy down or seller financing.

Difference Between Market and Appraised Value

John Watts (Keller Williams Realty) — Mon, 17 Aug 2009 14:52:04 -0500

Many times buyers and sellers do not fully understand the difference between market value and appraised value. These two values for a property are generated from two different procedures and may reflect different points in time. The appraised value is a professional estimate based on prior sales of similar properties. This estimate normally takes into account the following amenities of each property: square footage, location, construction, and number of stories, etc. The appraised value is done by a certified appraiser who expresses his or her opinion what the property is worth at that point in time. If you had multiple appraisals done by different appraisers at the same time, it is very possible you would get different appraise values, but they should be reasonability similar in value. The appraised value should be a good indicator what the property would sell for on the market. Now turning to market value, ultimately, the market value is the price a buyer is willing to pay for the property. Another method used to determine the value of a home is the comparative market analysis (CMA). This is done by many realtors to assist the seller in determining the listing price for their property. This procedure compiles sales data of recent sales in the neighborhood. Sometimes, realtors will include data of active properties on the market to inform the seller of their competition.

Visit Neighborhood Prior To Buying

John Watts (Keller Williams Realty) — Mon, 10 Aug 2009 18:58:37 -0500

Always make impromptu tours of the neighborhood prior to purchasing a home within the neighborhood. In many states, buyers have three options available to them to make tours and visit with homeowners within a neighborhood. The first option, visit and tour the neighborhood prior to making an offer. This is the ideal time to perform this task, but not always feasible due to time constraints caused by other factors. For the second and third options, many states provide a period of time whereby the buyer may be able terminate the contract with minimum financial lost. Therefore, the second option would be to submit a contract offer to the seller, then immediately visit and tour the neighborhood while the seller is reviewing and/or accepting the offer from the buyer. Finally, the third option, has different names in different states, but essentially after the seller and buyer have executed a written contract, there is a grace period whereby the buyer can terminate the contract with minimal financial lost. This would be your final opportunity to visit and tour the neighborhood. When touring the neighborhood, do it at least 2 or 3 different times of the day. Visit with the neighbors, talking about schools, parks, theater, restaurants and convenience stores. Buyers, who checkout their new neighborhood have greater peace of mind that they have made the right decision.

Make a Good Offer

John Watts (Keller Williams Realty) — Fri, 07 Aug 2009 20:45:38 -0500

Making the highest offer is not always the most acceptable offer to a seller in multi-offer environment. No matter what environment you are operating within, making an offer with fewer contiguous will normally work to your advantage. Always remember when making an offer, the seller will be evaluating the likelihood the buyer will success in the transaction. Remember, sellers many times are willing to take somewhat less if their confidence level is higher with a smaller amount offer. Also, remember sellers want to move on with their lives in their new environment versus holding out for the highest dollar. Projecting confidence in your contract offer to the seller that the buyer is very capable closing the transaction will always be a huge advantage to all parties of the transaction. In my opinion, the simpler you can keep contact language, the greater success you will have with your transactions.

First-Look Appeal

John Watts (Keller Williams Realty) — Mon, 03 Aug 2009 14:59:24 -0500

The first-look appeal is when a potential buyer drives up to your home and views your property in the first 3-seconds. There is an impression created on this individual that will be either positive or negative. If you have created a negative impression on this potential buyer, it will be extremely difficult to get the individual to either tour the home or change his and/or her first impression, even if the home shows very nicely on the inside. When you decide to sell your largest investment, that is your home, there are several things you should insure have been done prior to marketing your property: yard is mow and trimmed, all trees and shrubbery are trimmed, shrubbery needs to be trimmed back 3 inches from the house, gutters need to be clean and not loose from the roof, house needs to be clean and/or freshly painted, driveway needs to be clean, seal and/or repaired if major defects are visible. Remember you are selling your largest investment; therefore, proof to potential buyers that this property has been well maintained. If you do this, it will reflect in your sold price.

Re-key Your New Home

John Watts (Keller Williams Realty) — Fri, 31 Jul 2009 10:43:49 -0500

After closing on your new home, it is a good idea to consider re-keying the door locks on your home. This is a major safety consideration to you and your family. Also, there are property insurance considerations, for instance; if somebody broke into your home, and if you could not show force able entry, your insurance company may refuse to pay the claim for property damage and/or loss of property. Recommend you re-key on both new and resale homes. On new homes, builders have one master key that opens all their built homes. When the new home buyer first uses their new keys given to them at closing, this is supposed to void the master key used by builder. This has not always been the case. Therefore, the safest thing to do, always re-key all door locks on your new home.

Buy Affordable Housing

John Watts (Keller Williams Realty) — Fri, 24 Jul 2009 19:55:45 -0500

In today's economy it is extremely important that a home buyer guard against buying more home than they can afford, especially if they encounter an emergency. Before searching for a home in earnest, at least get pre-qualified. Many times a lender will qualify a buyer for more home than they can afford. When you get pre-qualified or pre-approved, be sure to request a Good Faith Estimate. This report provides you the following estimates: closing cost, amount of cash to bring to the closing table and monthly mortgage payment amount. When purchasing a home determine how much house updating and furniture changes you will be making. Always remember, you will incur additional expenses that you did not allocate for. Recommend, you have a 10% reserve fund over and above the expenses you have allocated for house and furniture updating. Plus, be sure for the first year at least, you have a home warranty insurance policy, this will provide some protection against unexpected expenses. When making plans to purchase a new home, it is extremely important to analysis your financial situation and be truthful with yourself. If you do not do proper planning, at a later date you may be sorry homeowner. Even with the best of planning, there are no guarantees a buyer will not encounter future financial problems. At some point it time, you must move forward.

Understanding The Option Period

John Watts (Keller Williams Realty) — Mon, 20 Jul 2009 19:00:46 -0500

Many times I meet with home buyers who do not understand Option Period and how it is used within a residential property contract. In Texas, when an offer is submitted for a residential property, there will be two checks; one is for the option period and another for the earnest money. Option money check gives the buyer the right to terminate the contract for any reason during the option the period. Normally, the option period ranges from 7-15 days. The option fee is nonrefundable, and if the buyer does not exercise the right to terminate the contract during the option period, the amount paid by buyer will be credited to the buyer at the closing table. During the option period, the buyer should be having an home inspection, getting homeowners insurance quote and conduction further investigations to verify that is the right property for their needs and desires. Normally, the option fee is a much smaller amount than the earnest money given with the contract. The reason for smaller amount, the buyer wants to avoid a large loss since the money will not be return to the buyer.