We’re going to talk specifically about Texas. So if it’s in another state, a lot of these things are very similar, but they’re different state contracts, different state laws. So you want to apply it appropriately. And if you have any questions, obviously you want to contact your real estate attorney to go over it and read through anything you might not be too sure about. But when we sell a house to somebody, when we buy a house, if we’re the ones filling out the contract, we’ll show them the contract. We want to cover that. So today we’ve got a Texas real estate contract made by TREC. That’s the folks at the Texas Real Estate Commission.
It’s a standard form that they use that we use for our purchases and sales. So what does it have in there? Well, the first one is the parties on point one. So you got the people who are selling the property and who is buying the property is listed. Then point two is going to describe, where is the property? What is the property? So there’s a legal description, like a lot and a block number and then a city, state, county, and then also known as, and which is usually like a 123 Main Street, right? Or what everybody knows it as. You want to check that stuff. Makes sure all that stuff is correct. You can come down here to point three, sales price. It’s a pretty important one. Right. And so the first part on our standard form is going to be how much is the cash portion of the sales price?
So this cash portion, then if there’s any financing, that will go in here and then you got the total sales price. License holder disclosure, if a person filling it out holds a active real estate license, they need to disclose that. Fifth is earnest money. So they’re going to put up so much money with the title company, earnest money, good faith money. And that amount will be in here and you’ll have listed who’s the escrow agent, the person at the title company that you’re going to be working with, address of the title company, where that’s at. Next part is we start talking about the title policy and the survey in section six. So the title policy, it either says the seller’s paying for it or the buyer’s paying for it.
Typically, a seller pays for the title policy, unless it’s being sold to an investor. Then a lot of the time the investor will buy that. But it’s important because that’s a big one of your closing costs. So you want to make sure that that’s checked correctly, either you’ve agreed to pay for it, or you haven’t agreed to pay for it and where that’s going to come from. And then you’ll see at the bottom of each page, you’re going to initial, both the buyer and the seller are going to initial the bottom of each page.
It then goes on to talk about a few different things like what’s going to be covered and what they’re going to look for at the title company. Okay. And we’re not going to discuss every word of this, but big picture that it covers is who legally owns that property. Is it one person that owns it? Is it multiple people that own it? Who all needs to be in there? Is there any questions about the title or ownership of that property? And what things need to be cleared up in the commitment or the title commitment in order to have clear title so that the seller can sell that property. And when the buyer buys it, that the buyer owns it.
Next section talks about the survey. So a survey on a house is basically like, it kind of looks like a blueprint. All right. It’ll show like the lot lines. Well, where does the house end? Where’s the house sit? Is there any other improvements that need to be marked on there? Do they already have an existing survey? That’s good. Is somebody buying a survey? Is it the buyer or the seller buying a survey? And then when will we get that survey?
There’s a whole big section in here about HOAs and property management associations. Some properties have them, some do not. If yours is in one, then you’re probably quite familiar with yours. And there’s a whole lot of this part right here that talks about whose responsible for what. That you are obligated if you’re selling it to notify people about that there is an HOA, and then they’re going to reach out and check with that HOA. Make sure no money’s due to the HOA, things of that nature.
Now I always tell people, keep in mind when you’re looking at this. This was designed for the entire state of Texas. So there are parts in here that probably aren’t going to apply to many houses, but there are ones that they do apply to things such as tidewaters. We buy the majority of our property in San Antonio, Texas. It’s a middle of the state. We’re not having a whole lot of tide waters coming in and out. Annexation, right, so a big city may annex something. No one’s going to annex San Antonio. Right. So some of that stuff, is it in here? Should you know what it is? Absolutely. Is it going to apply to a lot of the sales? Not to all of them.
Talks about the property being in a utility service area, most cities and things have water, electric service. And there’s different parts where it’ll go in to talk about, well, if it’s not safe, it’s on propane. Then you have to disclose that it’s on propane and let people know. A lot of these things don’t apply to your typical subdivision because they have city water and city electric and things of that nature.
We come to section seven and they talk about the property condition, right? And there’s a couple of choices you can check in here. There’s what’s called a seller’s disclosure. So if you’re selling the property, lots of times you’ll fill out a seller’s disclosure. You’re letting people know what you know about the property. Sometimes there are reasons why you don’t have to fill one out, or you might be exempt for reasons of you have not ever seen the property, been to the property. Maybe you inherited it, you live out of state, things of that nature, but has the person who’s buying it received a seller’s disclosure. There’s also some talk about lead based paint. That’s for properties that were built before 1978. You have to disclose that they were built. Do you have any knowledge of lead based paint? The newer properties, you don’t have to have those disclosures in there. And then are you going to buy the property as is, or is the buyer expecting certain things to be done before the sale of the property?
And then it talks about completions of repairs. So if you’d agreed to do certain repairs to your house before it was sold, then it’s basically saying that you were going to agree and you’re going to document. And they’re going to show that you did the repairs that you agreed to do. Different environmental matters, lots of things you have to disclose. If there was ever hazardous chemicals, things that are obvious to a normal person that you would want to disclose, that you agree you’re not trying to hide anything.
Section H, residential service contracts. That’s basically, what’s lots of times referred to as a home warranty. Many times the seller will give 350, 450, $500 credit so that the buyer can purchase a home warranty. It’s pretty standard now. In most sales, we don’t do them when we’re buying, because we’re buying from the investment side and we buy as is. But that is where that typically gets filled out.
Talks about your different brokers fees that you’ve agreed to. If you’re using agents, agents have the brokers and what their fee’s going to be charged. And then closing, you got to have a closing date in there on or before, whatever date that you’re going to put in there. Possession section 10, either upon closing and funding or in accordance with a temporary residential lease. Sometimes people need to sell the house and they want to lease back or have a temporary residential lease for a certain amount of time after they’ve sold it. And you’re documenting which one you’ve agreed to do here.
I’m going to jump into this section 11, because I think section’s 11 important. And if you’re not familiar with these, it’s always something you’re going to want to double check. It’s called special provisions. It also is a spot where you can put in anything else that you want in there or anything else that you and the buyer and seller agree to. That should be in there. We often will put in that we accept the property as is. That if we need to go see the property prior to closing, they’ll allow us in the property. If we’re paying for all the closing costs, we’ll put in there we will pay all standard closing costs associated with the transaction, things of that nature. But if you’re signing it, you want to know what it says in there because that’s something that was added in there.
Settlement and other expenses, who’s agreeing to pay different settlement expenses. So different costs that are associated with the title company, et cetera. Also, if you’ve heard like, oh, well they paid for our closing cost or they gave us this much toward closing, that can be put right in here.
13 is proration of taxes. So you owe taxes on a house, lots of times your county taxes until the day you sell it. So they’ll do a proration. So if you sold it on January first of the year, there wouldn’t be a proration for that year because it’s the first day. But if you sold it on October 15th of that year, you would owe taxes up through October 15th and then the person who’s buying it from the day that they bought it October 15th on, then they would owe the taxes, which at least in the state of Texas or county, and there can be some county and city taxes. But anyway, it’s going to be divided up. And you’re going to owe up until you sell the property.
14, casualty loss. If it burns down or lightning strikes and the property’s destroyed well, the buyer obviously wouldn’t still have to buy the property.
Different federal tax requirements, that can definitely come into play if the person who’s selling the property is from another country. And did they own the property as investment or as a resident. It doesn’t come up a lot, but I have seen it. It does happen. Where do you want your notices to go? So the buyer, where do they want their information set, name, phone number, email, and same for the seller. Is there anything else attached? There’s a lot of common check boxes. So things like that disclosure lead based paint, if there was a seller’s disclosure, is there going to be a temporary lease, many other things. So you want to check, see if any of those boxes were checked before you sign it.
Termination option. People will have a termination option or an option period. And you’ll see that said in there. So lots of times they’re like, in a standard transaction, it’ll be a 10 day option period and they’ll pay $10 a day or something similar to that. What it means is they can come in, they can do their inspections. They can check through the property. And if they see something that makes them no longer want to buy the property, they can cancel the contract. And they’re only giving up that option fee or that $10 per day or whatever was agreed to.
If you’re selling a property, say as is or directly to an investor where someone has agreed to buy it as is no matter what it, you want to make sure. Because we almost never have a termination option in ours because we already said we would buy it. We seen the property and we’re going to buy it as is. So we don’t need something in there. So you’d want to keep an eye out for that if you were selling to an investor and they said that they needed a certain amount of time for a termination option. And that would probably raise a thought.
Some people will close with an attorney and not a title company, or sometimes people will list their attorney that they’re using. Sometimes if there’s multiple people selling the property, maybe it’s a case of a divorce or there’s any kind of disagreement, then they’ll also have an attorney’s name in there. Lots of times people don’t have a separate attorney representing them. So it’s not always filled in there. When was it executed? When did you sign it? And you turned it in to the title company. This last part is for like your brokers information. So if you’re using a real estate agent, real estate broker, they’ll have their information listed in there and what the agreement is.
And then this last part, once it gets over to the title company, they’ll say that they received this contract and that they’ll fill out that an option fee was given, the earnest money was given and that they received it. And they look forward to working with you. I hope that clears it up. Remember, you want to know what you’re signing. Big red flags. You never want to sign something that’s blank. I know it sounds crazy, but I’ve seen it, right? So you want to make sure something that’s appropriately filled out. If you have questions, have somebody review it that’s a professional.
If you’re going to fill it out on your own and you never done one before, I would strongly recommend that you get some help from an attorney or someone of that nature if no one’s helping you do it. Other than that, if you know what’s in there and you know what you’re signing and look for a standard form. And then you can fill it out and move forward with selling your property. I hope this helps. I hope this gives a much better explanation. I know we didn’t cover every single word, but at least you got a real good idea of what you’ll be signing in the contract to sell your house. If you need anything from us, give us a shout (210) 201-6644 or through the website, sellmysanantoniohouse.com.