1% of the sales price is customary, but earnest money is a negotiable term. The earnest money is credited to the Buyer at closing as a portion of the down payment or closing costs. Earnest money is refundable if the buyer backs out during the option period.
The amount is negotiable but generally ranges from $300-500. The option period gives you time to have the property inspected and negotiate any repairs/credits. It also gives you the right to terminate the contract and receive your earnest money back. The option period is typically 7-10 days.
During the option period, it is recommended that you hire an inspector to look at the property. Most of the time on a home under 3,000 square feet, an inspection will run around $350-$500. You should also have a pest/termite inspection completed, usually around $100. Additional costs and inspections can be necessary depending on the home. For example, septic and pool.
An appraisal of the property typically costs between $400 - $700. You will need to pay your lender/appraiser for this before the completion of the appraisal.
If the Seller does not have a usable survey, the survey is typically purchased by the Buyer. A survey will typically cost around $500-$700. Most re-sale homes will have a usable survey.
Closing costs consist of mostly loan items, title fees, and sometimes taxes. The total amount generally falls between 1-3% of the purchase price. These costs will be paid at closing along with your down payment. The lender will need to quote you the costs associated with the loan.
General Guide to Buying a Home in the Austin, TX area:
- Narrow Your Search Based on the Price
Before you begin the home-buying process, you are encouraged to speak with a lender who will help facilitate and determine how much you can afford in a home and what type of loan you will be using. The lender will provide you with a pre-approval letter for the amount you require. This will be vital when you submit an offer.
- Search For Your Home with a Century 21 Realty Network Agent
Once you have received your pre-approval from your lender, it’s time to begin your home-buying search. Your Century 21 Realty Network agent will help you narrow down your criteria; including which neighborhoods you want to target, school districts, size of the home, home features, etc. We will use the Austin Multiple Listing Service to create a customized and real-time search of active listings to begin viewing properties that you are interested in purchasing.
Once you find the right property, your Century 21 Realty Network agent will review market conditions and determine the best way to approach making an offer. This can mean anything from low-balling to offering over the asking price in a multiple-offer situation. The negotiations may go back and forth a few times before finalizing terms. This step is a bit more nuanced and involves seeking advice from your agent as to what is going to win you the home.
After both parties have accepted the terms, you will go “under contract.” At this time you will provide earnest and option money to the title company to open escrow. You have 3 calendar days to deliver the funds.
Now begins the negotiated option period, usually about 7 days but can range from 5-10 days. Inspections are performed to get an accurate picture of the material aspects of the property, including any minor and/or major defects that could affect your decision to purchase the property. It is important to note that negotiations will also take place during the option period based on the results of the inspections.
After the inspections are complete, and any changes or negotiations made to the contract have been agreed upon by both parties, your lender will order an appraisal on the property. Please keep in mind that it is imperative that you provide documents to the lender as soon as possible when requested.
On the day of closing, you will need to bring a cashier’s check for your down payment and closing costs along with a photo ID. You will receive keys once all docs are signed and your lender releases funds to the Seller.
