The real estate market is complicated. We know how hard it can be to figure things out on your own, so we provided a FAQ below to shed light on our clients’ most pressing questions.

What’s the deal with back up offers?

In our incredibly competitive market, it's not always possible to come out the victor in a multiple offer situation. Backup offers do sometimes move into the first position; in our experience, about 10-20% of the time. While these aren't high odds, there are benefits, such as the following:

  • It doesn’t usually require much money to secure a backup offer. 
  • Typically we give somewhere between $50-$100 for an "initial" earnest money deposit and around $50 for an "initial" option money deposit. These will be collected within 3 days of the backup offer being fully signed by all parties. 
  • The balance of the earnest and option money (typically speaking earnest money is often 1% total of the purchase price & option money is between $200-$500 or so) will be due if and when we get notice that we are now in first position and no longer in backup position. 
  • This is a very low barrier to entry, and means you don’t have to compete a second time if the first offer falls apart. This takes away the future negotiation by securing it beforehand.
  • You are still able to continue shopping. If we find another home and your offer is accepted, we simply send notice to the listing agent on the backup offer. The seller is not required to sign, and you'll be out of your obligation on that property. Buyers should receive a refund of their earnest money.

All-in-all backup offers are a low risk way to be second in line should the primary deal fall apart for any reason at all.

What happens in the case of multiple offers? How can we stand out?

In the case of multiple offers, buyers can attempt to tip the scales in their favor. Remember that individual contract terms and conditions add up. Many listing agents fill out a spreadsheet with data, detailing how each piece of the contract impacts the seller’s bottom line. Below I offer an outline on how you can stand out! 

1.  How much are you willing and able to pay? We strongly recommend you contemplate what "your number" is. Your number is the perfect number in which you neither feel buyer’s remorse if you’re successful, nor regret if you lose out to a higher offer.

2.  What is the size of your down payment for a loan? While loans can accommodate as little as a 3% to 5% down payment, sellers experience less risk with a larger down payment and more confidence in your offer. 

3. Typically, earnest money* is 1% of the purchase price. If you can increase the amount, you'll show good faith to the seller with little risk to you. Earnest money is often returned to the buyer unless they fail to follow the contract terms and timelines. 

*Please note that earnest money is different from option money, which will be forfeited if you cancel the contract.

4.  Although this was traditionally at the seller’s expense, it is now common for buyers to offer to pay for the owner’s title insurance in order to be competitive. The title insurance is a set fee regulated by the state for various price points, and we can refer you to calculators to help determine the potential cost. Consider offering to pay for the title insurance in order to help the seller’s bottom line. 

5. Some buyers like to ask for a home warranty. It's very common in a multiple offer situation to simply skip over this ask, giving your offer a small advantage.

6.  The appraisal waiver addendum for financing, or partial waiver, is critical in most price points in a multiple offer situation.  We are frequently competing against cash buyers, so determining what number you can actually make up the difference for on a short appraisal can make or break your chances of getting considered.

7. When bidding is competitive, and especially in a strong seller’s market, it’s important to prioritize if you are going to negotiate repairs. Buyers can ask for “dealbreaker” repairs such as the condition of the roof, HVAC, electrical panel and structural systems. If you plan to have an option period for inspecting the property, paying an amount that would be meaningful to the seller helps get your offer accepted.  

Some buyers also consider skipping the option period all together. This may be appropriate if:

  • You already feel you know the lifespan of the major systems and feel at peace with them.
  • You plan to do a major renovation and will be replacing major systems in the home.
  • If the home is new enough or the systems have been addressed recently enough.

8.  If a survey is needed, are you willing to cover the cost of that? Most of the time, unless totally illegible, the title companies will accept the survey and no new survey is required. In the off chance one is needed, are you willing to take on the risk of a potential $400-$800 fee for a new survey?

9.  If there is a homeowners association (HOA), how much in fees are you willing to cover? HOAs all have different fees and deposits for reserves. The more you are willing to pay is often more appealing to a seller. 

How much money do I need right now to buy?

The short answer is: it depends on your price point and current market conditions. But having about 1% of the purchase price + $500 in checking and at least $1,000 credit on your credit card is our recommendation for success. We strongly encourage having these funds available in your checking/savings account, rather than an investment account that may take a few days to access. Please have a personal checkbook ready when we start shopping!   

When your offer gets accepted, the clock starts ticking. Buyers only have 3 calendar days–not business days–to get Option Money and Earnest Money to the Title Company. After this point, you will likely hire an inspector, and may need to pay for an appraisal before the property is yours. Let’s define each of these terms.

  • Earnest Money - Typically a percentage of the purchase price. If you're buying a $500,000 home, expect to write a check to the title company for $5,000 or more. Some title companies allow wires or have digital means for securely uploading a check. Most buyers just write a personal check to the title company, who can send a courier to receive the check. Alternatively, locals can drop off a physical check or ship it overnight. We’ll help get this done!
  • Option Money - The amount is often between $300-$500, but it can increase in multiple offer scenarios and strong seller’s markets. Like earnest money, option money will also be delivered to the title company. Buyers often send the gross amount of option and earnest money to the title company once in a personal check or by other means. Know this: our team will present the options and coordinate things. Remember that delivering option money is super important. Buyers must deliver the earnest money on time. Otherwise, the buyer loses the unrestricted right to cancel the contract. 
  • Inspection - These often cost between $450-$750 most of the time. Unique features such as a pool, water well, septic system, solar panels, barn, casita, can cost more to inspect. Buyers often pay for these inspections with a credit card. Most inspectors provide the report after the buyer pays the inspector’s fee. 

Appraisal - These typically cost between $500 and $900. Lenders most often charge the buyer’s credit card. Please note that when an appraiser completes an appraisal, it must be paid even when the contract doesn’t close.

What types of neighborhoods and builders are out there?

New homes exist on a spectrum with small builders, large builders, spec (defined below) and production builders, and custom builders. Small builders have flexibility of terms, conditions and pricing. They can have higher profit margins and raise prices to offset volume, however they tend to be more vulnerable to downturns and higher risk for buyers.

Large builders have little or no price negotiation. They adhere to a business and build formula–this means less flexibility for buyers and tighter profit margins for the builder. The upside is they tend to be lower risk for buyers and have the financial strength to endure through a down market.

Spec and production builders build the same floor plan repeatedly; it's a repeatable formula for business success. “Spec” in spec builder stands for “speculative,” meaning the home is built on the speculation that it will appeal to many possible buyers, selling quickly for a profit. They offer less flexibility for custom features, or if they do offer them they may charge a high premium for them. They have tight schedules and narrow profit margins. Buyers need to be diligent over the construction, and perform quality control with inspectors. This is because spec and production builders feel the pressure to sell products quickly to free up capital, working with the goal of selling the completed homes first. These builders tend to move fast with shorter build times.

Custom builders have high profit margins, allowing them more flexibility in customizations, pricing, and contract terms. The design and build time might be longer, and modifications often increase the price. Custom builders are usually more diligent over quality control because they are small operations and their reputation with clientele matters. The biggest risk to buyers is ensuring the builder can complete the job.

Do you help with new home construction?

The short answer is, yes! We take care of the following parts of the new home construction process: 

  • Research subdivisions and builders
  • Educate the buyer on developments, builders, subdivisions, construction issues, and the new-home purchase process
  • Shape realistic expectations of markets and properties
  • Assist the buyer in defining their wants and desires
  • Schedule visits to neighborhoods and make appointments with on-site representatives
  • Evaluate houses, lots, subdivisions, and locations
  • Prompt buyers to ask insightful questions and entice builders to answer them
  • Advise the buyer rather than just trying to get the best deal
  • Advise client on the cost-benefit relationship and resale value of upgrades and options
  • Negotiate favorable terms for the buyer
  • Review and explain transaction documents. Lawyers might need to help with esoteric builder contracts!)
  • Monitor the construction progress
  • Remind buyer to schedule phase inspections at critical phases and offer a list of service providers
  • Manage the transaction by creating and maintaining the paper trail
  • Accompany the buyer on the final walkthrough and call attention to things for the builder’s punch list of items for completion or correction
  • Accompany the client to the closing

How are you paid?

Whether helping a buyer or seller, we receive a success fee directly from our clients. Some real estate professionals might say: “buyer agents are free; the seller pays for it.” This is technically incorrect at best, and at worst, deceiving to consumers. Our client agreements clearly and concisely explain how, and under what circumstances, we get paid. It is typically a percentage of the sales price.

If the other party (buyer or seller) acts in bad faith, what happens?

Tell your real estate professional. Document everything. If need be, involve the brokers. And you may wish to contact the Texas Real Estate Commission, who oversees all real estate licensees in Texas.

What are my options if the house doesn’t appraise for the purchase price?

There are a number of possible outcomes that may impact the purchase price, or how much money the buyer brings to closing, for example:

  • The buyer brings additional cash to closing. The buyer can choose to include an appraisal addendum for financing with their offer to make it more competitive--this comes in the form of a full waiver or partial waiver. With a full waiver, the buyer agrees to waive their right to terminate the contract should the appraisal be too low to satisfy lender’s requirements. With a partial waiver, the buyer agrees to set a limit for what the property appraises to without reopening negotiations. In both cases, the buyer must be ready to bring cash to closing to make up for any difference against the lender’s contribution.
  • The principals can renegotiate or cancel the deal. The buyer can always choose to renegotiate, in the case that they don’t include a waiver, or if they include a partial waiver and the appraisal comes in below the limit.

The purchase price could decrease. If there is a difference between the sale price and the appraised value, the seller may choose to lower the sale price accordingly.

Besides helping me find a house, what do you actually do?

Real estate professionals negotiate, help perform due diligence, manage the transaction details, and project manage the whole process of buying or selling. Contrary to what some imagine, real estate agents don’t just locate property for buyers or install yard signs for listings. Most of our work happens when two parties want to reach an agreement concerning the sale of a property. At this critical stage, negotiations occur and inspectors and specialists (such as roofers or electricians) identify and solve the property’s problems. Real estate professionals attend to and manage the nitty gritty details of the real estate transaction. This involves reviewing the title commitment and escrow documents, negotiating for repairs, and ensuring the repairs occurred.

Should I order a home inspection?

99 out of 100 times the answer is a resounding yes. Home inspections reduce your risk as a buyer and as a seller. For a buyer, hiring a professional to evaluate the home is a common way to ensure awareness of the property’s condition, giving them the information they need to negotiate repairs or cancel the sale if need be. 

For sellers, doing an inspection before putting the home up for sale is also a smart move. It strengthens the sellers negotiating position, as they disclose everything about the condition of the home up front to buyers.

What is your relationship like with financial planners?

Our approach to financial planning completely depends on your needs. Some clients come to Oikos Real Estate Group with an established financial planning relationship. We love that! We will work closely with any part of our client’s financial team--be it a financial advisor, tax preparer, attorney, etc. This collaborative approach allows us to ensure that the real estate transaction is in your best interest and aligned with your goals.

If you need financial planning assistance before or after a real estate transaction, we have Sarah Ponder, CFP®  as an in-house resource. At your discretion, Sarah, the founder of Real Estate Wealth Planning, can provide independent financial guidance during your real estate transaction with Oikos. 

We can also refer you to an independent, fee-only financial planner, who is usually a member of NAPFA or the XY Planning Network. All financial planners in these networks are compensated clearly by clients only, and like Sarah, do not sell any commission-based products, such as insurance or fee-laden investment products.

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