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Buyer FAQ


We are ready to lead you through every step of the process, i.e., from finding the right home to winning bidding war and everything in between.

Buying your home isn’t something too hard for you to grasp. But it sure is a massive task with a lot of small moving parts.

Don’t worry! We make the entire process simple for you.

Here are answers to some of the most frequently asked questions about buying a home. Please feel free to reach out to us if you have more questions.

1. How much money does it cost to hire a realtor? How does the commission work?

In Texas, in the majority of the cases, the seller agrees to pay the commission of both agents – the one who’s listing their home for sale and the one who’s representing the buyer. This means that both agents are working for free until they close the deal.
The payments made to the real estate agents are usually paid out of the proceeds of the sale. The commission rates are variable, depending on the scenario. Contact your Texas Tier Realty agent to learn more.

2. What are the costs of buying a home?

While most buyers understand that they will be paying a mortgage once they have made a purchase, they also incur some costs as part of that purchase. These initial costs include:
EARNEST MONEY – It is a security deposit that buyers submit during the execution of a real estate contract to demonstrate that they are serious about the purchase. The purpose of this deposit is to serve as a remedy to the seller in case you break free from the contract.
In Austin, homebuyers place 1% of the sales price as earnest money. This translates to the fact that if you are bidding for a home worth $500,000, then its earnest money will be $5,000. In some cases, certain buyers increase the amount of this deposit to make their offer more attractive to the seller.
The earnest money isn’t directly handed to the seller. Instead, it is kept in an escrow account and held off the seller’s behalf. Once the deal is finalized, and the transaction is closed, the earnest money is credited towards the final sales price. If, as a buyer, you somehow don’t wish to proceed with the purchase during the “option period,” you can ask for the refund of your earnest money.
OPTION MONEY – An option period starts once the real estate contract is executed – all terms are signed and agreed upon. During this period, the buyer bears the right to terminate and bail out of the agreement for any reason as long as they provide timely notice to the seller. As a home buyer, consider this as your chance to perform any due diligence you deem necessary before finalizing the deal. During the 7-10 days of this period, we move ahead and get the home inspected and make sure that the property is in optimum condition.
Since the seller is taking a risk by changing the status of their home to pending or under contract, home buyers often pay for the option to terminate the agreement. This way, you are technically buying an option to terminate the contract for any reason.
The option period is a critical negotiable term of a real estate contract, and its cost and length might greatly vary. When the market is competitive, we often either decrease the option time length or increase the number of option fees to make things attractive to the seller.
In Austin, the option fee varies from $100 to $5,000 – depending upon the cost of the home you are going to purchase. Since the option fee acts as a deposit to secure the contract with the seller, it is not refundable if you choose to terminate the contract during this period.
INSPECTION COSTS – Before finalizing the purchase, we advise you to have the home inspected by a professional home inspector. The inspector will review the condition of the property you are going to buy. They look at every aspect of the property, including structural and mechanical systems. The cost of an inspection varies between the size of the home and the services the inspector is providing. For a single-family home, the inspection costs range between $500-$1,000.
Certain factors affect the cost of an inspection. For instance, if you are buying an older home that might have cast iron plumbing, you will have to ask for a static plumbing test to check the integrity of the system. Similarly, a property with a swimming pool, foundation, and stucco is likely to cost you more during inspection time. All of these things combined can drive the costs to $2,500.
LENDER COSTS & FEES – The lender incurs a fee as part of processing your loan to purchase the property. These costs are passed onto you as the closing costs and are usually paid at the end of a transaction. These fees cover expenses like recording, credit report, appraisal, and legal fees. A detailed list of these fees is part of the “settlement statement” provided to you by the lender three days before closing.
DOWN PAYMENT – This is a percentage of the purchase price that you pay at the time of closing. The rest of the purchase price is paid overtime as a mortgage. Traditionally, the down payments are termed as percentages that can range from as low as 3% to 20+% down.

3. What is the average down payment range?

The percentage of down payment depends upon your lender. They could ask for different down payment based on the price of the home you are buying, your credit history, and other factors. There are programs funded by the federal government that help you fund your down payment. Mostly, the down payment varies between as low as 3% to 20+% of the total purchase price.

4. What’s the difference between assessed, appraised, and market value?.

This is another question frequently asked by buyers. Here is a brief rundown of the different ways to estimate the value of a home.
MARKET VALUE – This is the price a buyer is willing to pay for the property. A real estate professional on their team will gauge the current market scenario and perform a comparable market analysis of the recent sales of similar properties. It is essential to understand that this process is an art and a science, and every professional might have their own opinion of value.
APPRAISED VALUE – If you are seeking financing on the purchase, then an appraisal is to take place. It is executed by the lender to make sure that the buyer is paying the right price for the property. Appraisers usually create a 5 to 6 home radius around that particular property and compare the properties that have sold in that area.
ASSESSED TAX VALUE – The assessed tax value is the assessment done for tax purposes. Each year, the county tax accessor’s office places a certain amount on each property. This value helps them ascertain the tax on each property. It is often observed that the county tax value doesn’t align with the market value of a home. This is because there are no laws in Texas that require home trade prices to be revealed.

5. Where do my option money and earnest money check go?

The earnest money is handed over to the title company, where it is cashed and moved to an escrow on the seller’s behalf. Once the deal is finalized, and the transaction is closed, the earnest money is credited towards the final sales price. If, as a buyer, you somehow don’t wish to proceed with the purchase during the “option period,” you can ask for the refund of your earnest money.
The option money is directly paid to the seller. Since the seller is taking a risk by changing the status of their home to pending or under contract, home buyers often pay for the option to terminate the contract. This way, you are technically buying an option to terminate the contract for any reason. That being said, once you are past your option period, both your option fee and earnest money are credited to you at closing.

6. What is a bidding war?

The market fluctuates depending upon the supply and demand. If there’s a high demand for homes but a low inventory on the market, it is considered to be a seller’s market. In such a market, multiple buyers bid on the same home, which often creates the “auction effect” or a bidding war. In such a scenario, people compete against each other to purchase the home.
Similarly, a bidding war also occurs when a seller keeps their home at a low price hence making it an attractive choice to buyers. The bidding war, as a result of this strategy, ends up driving the overall price of the home.
Furthermore, price isn’t the only determining factor of starting a bidding war. It has been observed that limiting the contingencies and lessening risks for the sellers can also help you win a deal in a multiple offer situation. Therefore, you can consider limiting the option period, allow the seller to lease the property back while they secure a new home, increase the money of the option period, and more.
It is solely up to the homeowner and the real estate agent to handle a bidding war situation. They can either sign a contract with the first offer that comes in or wait to go ahead with the best offer. During such a situation, we ask buyers to bring in their best offer by a particular date. This not only keeps us transparent with other parties but also allows potential buyers to improve their situation before we make a final decision.

7. Working with a listing agent will help me land a good deal?

This isn’t true. A listing agent works with the sellers, and they are obligated to working in their client’s best interest. This translates to the fact that the listing agent will not have your best interest at heart while negotiating on your behalf. At the same time, a listing agent also has fiduciary duties to the sellers. Which means that they have to disclose everything they know about you to the seller. To prevent this from happening, you can sign a dual agency agreement, which makes the listing agent a messenger between the two parties.
The bottom line is that if you choose to work with a listing agent, you won’t have any representative in your corner.

8. Should I buy my home once the market cools down?

The home prices in Austin have been on the rise. At the same time, it is tempting to wait for the market to cool down. During the past 30 years, the home prices in Austin have only gone down twice – once in the 1980s and again during the recession of 2008-9. Even during those times, the decrease was only 3-5%.
Here are some variables you should consider while looking at the timing of purchasing a home:
1. INTEREST RATES – The buying power of people decreases with the rise in interest rates. This means that every 0.5% increase in interest causes you to pay a 5.5% additional mortgage each month. For a 30-year loan on a $500,000 home, you are going to pay an additional $43,000 in mortgage payments because of the spike in interest rate.

2. ARE YOU SELLING YOUR PROPERTY? – If you currently own a home and you need to sell it before buying a new one, keep in mind that if you wait, the value of your investment will cool down with the market.

9. Is a condo or single-family more liability?

A condo or single-family home is not the issue of more liability. Instead, it is a matter of how they are shared. For a single-family home, the homeowner’s insurance will be more expensive than a condo policy. Moreover, repair & maintenance are solely the home owner’s responsibility. Therefore, there are more costs involved with being a single-family homeowner.
On the other hand, a condominium spreads the burden of repair and maintenance costs on all the owners. On top of that, the insurance policy of your condo is less as the insurance of association’s master cover a lot of large ticket items such as the roof. If you find yourself confused while deciding, consider working with your real estate agent and lender to understand the implications of each.

10. What do I need for a pre-approval for a home loan?

A pre-approval for a home loan can boost your chances of coming out victorious from a deal. Therefore, it is important that you start working with a lender as soon as you start looking for a home. The pre-approval letter says that you can afford the “x” amount after they’ve looked at your financial standing.
To get pre-approved, get a hold of the following documents:

  1. Tax returns for the past two years
  2. Pay stubs for the past three months if you are employed
  3. Profit and loss statements if you are self-employed
  4. Bank statements for the past three months
  5. Any assets such as 401k or retirement accounts
  6. A gift letter if you are going to obtain money from a family member
  7. An overview of your credit score and monthly debts
  8. Mortgage statements if you already have a mortgage.’
  9. if you are divorced, a copy of your divorce decree and documentation of any child support payments

Having all of these documents prepared in advance will help you and your lender speed things up in the beginning. Most lenders will be able to pre-underwrite the loan, meaning that you will already be approved as a buyer, and the lender will only need to approve the home after the appraisal. This is a huge bonus, especially when you are competing with multiple offers.
But before you get pre-approved for the loan, you will need to select a lender. In Austin, the majority of lenders have similar rates. However, there are certain local lenders whose rates are more competitive, and they have a good reputation among the agents. This can also add credibility and weight to the pre-approval as the seller’s agent will know already.