Real Estate Contracts Information and Terms For Texas
In Texas, as in all U.S. states, a written contract is required when buying and/or selling residential or commercial property in order for the transaction to be enforceable. A real estate sales contract must be agreed to by both parties (i.e. bilateral) and therefore must contain information about the buyer and seller as well as about the property. Once it is signed by both parties, a real estate contract is legally binding. Contracts written incorrectly may wind up costing the buyer or seller more money than necessary or be as if there had been no contract. The sale may even fall through.
Be prepared for your real estate closing. Be familiar with the real estate terminology involved in the process before signing the contract at closing.
The following questionnaire will ask you questions about yourself, the property and the other party. Included is an explanation of terms. Complete filing instructions are also included.
The Survey: Who pays for it?
The buyer typically pays for the survey. This is because it is the buyer who needs to know the property boundaries as shown by county records. The buyer, as well as Title Companies and Lenders, also want to know if there are any violations of easements on the property (i.e. is the house built over a gas pipeline easement?).
If the seller has a survey acceptable to the title company, no survey is needed. However, between the buyer and the seller it is negotiable who pays for the survey.
Title Policy: Why do I need it?
When a seller signs a warranty deed, he is giving a warranty that he and only he, has good ownership of the Property, that there are no Federal, State, county, city or any other type of liens against the Property. If there are any title defects, the seller must pay attorney and court costs, plus the costs to fix any title defects to buyer. If necessary, the seller completely refunds the sale price to the buyer.
The warranty deed is forever. Buyers and lenders need to know this warranty can be trusted. Thus, the need for title insurance.
Typically, sellers pay for title insurance to cover this warranty, while the buyer pays for any extra endorsements. (Lenders coverage and coverage for property increase in value). However, this is negotiable between the buyer and seller.
Earnest Money: What is it?
Earnest money compensates the seller if the buyer violates the contract to buy the property. The money compensates the seller for having taken the house off the market to sell. Earnest money is placed by the buyer with the Title Company in Trust. It is not advisable to give earnest money directly to the seller. Additionally, it is a good idea to always obtain a receipt.
This money may be the seller’s if the buyer violates the terms of the contract to buy the property. The title company applies escrow money according to the contract. Usually, first to the buyer’s cash down payment, then to the buyer’s expenses and any excess refunded to buyer. The title company is bound by the terms of the contract on earnest money. If earnest money is required, the terms of the release of it are negotiable by buyer and seller.
Option Fee: What is it?
An option fee allows a buyer to terminate the contract for any reason within the number of days specified by the contract. Any earnest money paid is refunded. If there is an option fee, it may or may not be applied to the sales price at closing.
If it is not, the seller keeps the option fee. The option fee is paid by the buyer directly to the seller within two (2) days of signing of the contract. The buyer should keep a receipt of the payment.
