Putting a house under contract

[Ramar Price]

I have been wandering this for a long time and my thing is how do you put a house under contract, is there money involved or do you just speak a number that sounds good and thats it, i would like to know how that works.

[Tamara Elliott-Deering]

You need to get it in writing. Unless you are a licensed Realtor in TX you aren't allowed to use the Texas Real Estate Commission contract but you can use the Bigger Pockets form. In order for a contract to be binding in Texas you need to have the property description,  consideration (money) and signatures from all parties on the deed. All signatories must be at least 18 years old. 

Sample transaction:

Someone calls you and says I'd like to sell my house. You get the info on the house and very quickly run it through your rehab calculator and offer them a range - if the after repaired value is $150,000 your range might be $75,000 - $95,000. If they don't hang up make an appointment to see the house. (Try and get them to tell you what they want for the house before you offer a price, see if that price is in your range or close to it)

You go see the house and you see that it needs $10,000 in repairs so if you use the standard 70% of ARV - repairs your max price would be $95,000 so offer $85,000 or what you think they'll take. Once you have agreed on a number you fill out the offer form.

In the special conditions or inspection period make sure you give yourself an option period. That's standard in Texas and in retail real estate transactions it's usually about a week and costs about $10 a day. Try getting 14 days for $25 this is your get out of jail free card. If anything was wrong in your assumptions and this house is no longer a deal you can walk away during the option period and only lose the option fee. In the Earnest Money put as little as possible at make it payable after the inspection period.

After the contract is signed you will take it to a title company or your attorney they will "receipt the contract" and open title. Other questions you will answer is who pays closing costs and title insurance.  Depending on how great of a deal it is you may want to pay all closing costs but typically the seller pays for a title policy, if you are working with a lender they can help you with these steps. Also, make sure you include a clause about financing if you need to get it and the closing date. 

Those are the basics of getting a house under contract in Texas.