Know the financial transactions about a home purchase, Real estate tech advice, Construction applications
Know the Financial Transactions about a Home Purchase
1 Nov 2022
In Texas, during the process of a sale of a home, two agents are involved. The home seller takes the services of an agent to list the home for sale. The homebuyer takes the services of an agent to represent the buyer in the process. The seller and buyer agents work for free until the deal is closed. However, after the deal, the home seller disburses the commission to both the seller and the buyer agents. The payments to these agents are made from the proceeds of the sale. Typically, this is 3% for each agent.
When a real estate contract is implemented, the homebuyer submits a security deposit called ‘Earnest money.’ This is evidence that the homebuyer is serious and sincere regarding this transaction. If the homebuyer breaks the contract, this earnest money becomes the home seller’s default remedy.
In Austin, the earnest money is typically 1% of the sales price. As the market is very competitive, some homebuyers increase this percentage so that their offer becomes more enticing to the home seller.
The homebuyer has to pay earnest money to the title company. This company deposits the money to an escrow account and holds it on behalf of the seller. After all the home purchase transactions are over, this money is credited to the final sales price. It becomes a deposit towards the final purchase price of the home. If the homebuyer decides not to buy the home during the option period, this money is refunded to the homebuyer.
In a home purchase, the seller and the homebuyer have to agree on all the terms and then sign the real estate contract. On the date when the contract is signed, the option period begins. This is a specific time when the homebuyer can finalize not to purchase the house and terminate the real estate contract if the homebuyer submits a proper and timely notice to the seller.
Homebuyers can leverage this option period to implement due diligence before finalizing the home purchase. The option period is typically 7 to 10 days. During this period, the homebuyer can inspect the home to identify underlying issues, such as electrical, plumbing, and roofing, which can impact the home’s final price.
After the real estate contract is signed, the home seller alters the status of the home to pending or under contract. This is a risk for the home seller, homebuyers pay for the option to terminate the contract, and in this way, they compensate the risk of the home seller and display good faith to the home seller. Thus, the option money is for the homebuyer to buy the option to terminate the real estate contract.
In Austin, the option money varies from 100 to 5,000 USD based on the home price or strategic negotiation reasons.
If you want to know the details of the above financial aspects or other financial aspects related to a home purchase, visit spyglassrealty.com. Spyglass Realty is the best real estate agency in Austin, which has assisted more than 3K families in manifesting their dreams of buying their own homes.
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