I remember standing in a vacant living room when my wife walked in from the kitchen and said she wanted to do it. We were about to make an offer on our first home! So I called my friend who is my realtor and occasional drinking buddy to start the process of submitting a bid. As a lawyer, everyone assumes that I know the law in all subject matters regardless of country or planet. That’s ok. But the reality is that purchasing a home and all the legal matters that come with it can be stressful even for a marquee legal legend like myself so I felt the need to share some information that might help you into, or out of, your next home purchase.
Some home sellers will request or require a pre-approval mortgage letter from a lender before they will consider your offer to purchase. Obtaining a pre-approval letter does several things. First, it will keep you from walking into miniature Mar-a-Lago, when you actually have a budget in the Oyo Motel kind of range. Second, pre-approval letters also help buyers extend their option period should extra time be needed for home inspection or more formal lender approval. Sellers often view a pre-approval letter as an indicator of the future success of the purchase process, and this can have enormous benefit to you as the buyer. Lastly, going through the excitement and anticipation of owning your first home can land really flat if you are informed later that financially, it might not be the time for you right now even though you just maxed out your credit line at La-Z-Boy.
And because my banker would kill me if I didn’t put this in this blog post: A pre-approval letter is just a non-binding screening mechanism that does not obligate the bank to lend. The actual loan approval is much more painful and stressful. Most of the time, pre-approval letters are letters of intent only, and they are sometimes solely based off your credit score and what you say is your income. The real fun comes later when you have to document your assets and debt. You will also have to fill out a much more comprehensive loan document. Here’s a tip: Don’t lie on it. It’s a criminal offense to fudge information on a loan application to obtain credit.
Your offer to purchase a home might start with a phone call between your realtor and the seller’s agent. These verbal offers are not enforceable, so you want to make sure that when an agreed price is exchanged, you get your realtor to submit the agreed offer in writing. Your offer is not locked in until the buyer signs off on the written purchase offer. I have had several clients tell heart-breaking stories about how they locked down their dream homes, only to have the house “sold out from underneath them” when the seller accepted another written offer.
When your realtor sends you the documents to submit your offer, you will likely find that there is nothing simple about conveying your best price for purchase. The offer itself is a contract, and there are multiple obligations and rights between the parties that you must acknowledge when you sign on the dotted line. This might sound silly, but take the time to read the documents your realtor provides you. If you don’t understand something, ask your realtor about it. If you still feel uncomfortable about what you are signing up for, then have your realtor refer you to a lawyer who is experienced in real estate law in Texas. You might find that a small retainer fee to a good real estate lawyer is worth making sure you have all of your ducks in a row.
Lastly, make sure that you pay particular attention to the contingencies paragraphs in your purchase contract. Most of these contracts are standard forms that realtors print off but fill in custom language for the parties to better suit what the buyer and seller want from each other. If you want the refrigerator to convert (stay in the home you are purchasing) to you if you purchase the house, don’t just assume that it does. It is always better to be overly specific in what you expect from the seller than over simplistic.