1. Get the Fully Executed Contract Receipted by the Title Company
The title company will officially receipt the signed and executed contract. Once that happens, the buyer is on the clock to send in the earnest money deposit and option money.
The title company will open an escrow account that is not accessible to the seller or buyer. To maintain a secure, neutral transaction, they must keep all escrow money separate from their own business accounts and may not touch that money.
2. Pay the Option Period Fee
In Texas, the option period is a time when the buyer can back out at any time and receive their earnest money back. It’s negotiated by the buyer and seller and is typically 3-10 days. If the buyer backs out, the option money is not renewable.
3. Pay the Earnest Money Deposit
The earnest money deposit is due within 24 hours of contract execution. After the option period is over, the seller is no longer under obligation to return the earnest money deposit if the buyer backs out. If the property is not closed due to something on the seller’s side, or the lender is not able to close the loan, the earnest money is returned.
4. The Title Company Will “Run Title”
Running title means they’ll ensure the property’s title is in the name of the seller and has no leins or other encrumbances preventing a transfer of the deed. They examine the public records and ensure that any issues are resolved before the property can close.
Problems the title search can find include:
Inaccuracies in the previous contracts
Mental or legal restrictions preventing the owner from selling the property
Fraud or forgeries
Issues with the recording and indexing of previous title documents
Liens or judgments against the seller
Any unpaid taxes or tax leins on the property
Unreleased mortgages
Missing or undisclosed owners or heirs of a property that prevent the owner from selling the property
Any refusal of the purchaser to accept the property due to title conditions found in the title search
5. Complete the Home Inspection
Though it’s not required for cash transactions, at The Doss Team, we recommend always having a home inspection. The inspector will go through the home thoroughly and complete a detailed report of any repair or permit issues.
6. Complete a Pest Inspection
A pest inspection may or may not be required by a lender, but it’s a good idea to verify there are no termites or other pest issues. In a place like Texas with so many varmints, it’s better to be safe than sorry.
7. Complete Any Necessary Renegotiations Due To Issues Found in the Title Search and Inspections.
In Texas, renegotiations typically take place during the option period to ensure that the buyer can back out without losing the earnest money deposit. The renegotiations are at the discretion of the contracted parties and their representatives or lawyers.
8. An Appraisal Is Done
Before approving the loan, the lender must ensure that the property is worth the amount being paid. To do this, they hire an officially licensed appraiser.
If the property doesn’t appraise at a high enough value, the lender can’t approve the loan. The buyer can usually pay more down to cover the difference. If they choose not to, the earnest money is returned to the buyer.
9. Underwriting Approves the Loan
Once the appraisal comes back high enough, the lender will approve the loan. If the lender is unable to approve the loan, the buyer receives their earnest money deposit back.
Make sure the interest rate is correct, and all other agreed terms are clearly mentioned. More generally, compare your closing costs to the good faith estimate you received at the beginning of the process. Vigorously dispute any fees you think are illegitimate.
10. You Are “Clear to Close”
Once the lender has approved the loan, the title company verifies that there are no further steps or issues to be addressed. Once all issues are cleared, the title will declare that it is clear to close.
At this point, the lender will send out the closing statement to all parties involved in the transaction.
11. Final Walkthrough
Before the property is closed, the buyer has the opportunity to do a final walk through of the property to ensure no new issues have cropped up during the closing process.
12. The House Is Closed
Get your pen ready, because you’ll be signing a lot of paperwork. The title company will lead you through the various forms that need to be signed. The seller has their own closing
13. The House Is Funded
The buyer and lender send their funds to the title company, who in turn processes them to the seller, as well as anything going to the seller’s mortgage company.