Texas Homebuyer FAQ: Everything You Need to Know
Navigating the real estate market in the Lone Star State comes with unique rules and terminology. From understanding “Option Periods” to navigating property taxes, our expert team has answered the most common questions from Texas homebuyers.
1. What is the “Option Period” in a Texas real estate contract?
The Option Period is a set number of days (negotiated in the contract) during which the buyer has the unrestricted right to terminate the contract for any reason.
-
The Option Fee: To secure this right, the buyer pays a non-refundable “Option Fee” to the seller.
-
Due Diligence: This is the window where you conduct your home inspections and negotiate any necessary repairs.
2. How much Earnest Money is required in Texas?
While earnest money is always negotiable, the Texas industry standard is typically 1% of the purchase price. This deposit is held in escrow by the title company and is credited toward your down payment or closing costs at the end of the transaction.
3. Do I need a lawyer to buy a home in Texas?
In Texas, real estate attorneys are not required to be present at closing, as Title Companies handle the bulk of the paperwork and the transfer of funds. However, since Texas agents use state-promulgated forms (TREC), the process is highly standardized. You are always welcome to seek legal counsel for complex or non-standard transactions.
4. What is the “Homestead Exemption” and how do I get it?
Texas has no state income tax, so property taxes are a significant consideration. The Homestead Exemption allows you to remove a portion of your home’s value from taxation, which lowers your annual tax bill.
-
How to apply: You can apply through your local County Appraisal District once you have lived in the home as your primary residence on January 1st of the tax year.
5. Who pays for the Title Insurance Policy in Texas?
In many Texas residential transactions, it is customary for the seller to pay for the Owner’s Title Policy, while the buyer pays for the Lender’s Policy. However, like everything in a Texas contract, this is a negotiable item.
6. Can I back out of a contract if the home doesn’t appraise?
If your contract includes a Third-Party Financing Addendum, you generally have the right to terminate the contract if the property does not meet the lender’s underwriting requirements (i.e., it appraises for less than the sales price). We will guide you through your options, which include challenging the appraisal, negotiating a lower price, or terminating the deal.
7. How long does it take to close on a house in Texas?
On average, a Texas home closing takes 30 to 45 days from the “Effective Date” of the contract. This timeline allows for the option period, the appraisal, and the lender’s final underwriting process. Cash transactions can often close much faster—sometimes in as little as 7 to 14 days.