Not to be the bearer of bad news here, but when it comes to buying or selling a property it’s more than just house hunting. There’s a big portion of the process that all about contracts. Sounds boring… I know. But this is really the most important part! You’re signing your life away on a very, very expensive piece of property, so it would probably be nice to know what you’re signing…right?

While you typically trust your agent and would prefer them to just tell you to initial here or sign there, I always make an effort to sit down with my buyers or sellers (especially first-time home buyers) to walk through the contract they’re signing. Luckily as a REALTOR® in Texas, we are giving contracts and forms that have been prepared by attorneys that protect our clients, but regardless you should still know what you’re signing! I’m not going to break down the whole property contract line by line, but I will tell you what a lot of the verbiage means at a high-level help you understand what you’re signing.

I would like to always note that you should to consult an attorney if you have any questions about a real estate contract.

WHAT ARE YOU EVEN SIGNING: ONE TO FOUR FAMILY RESIDENTIAL CONTRACT

Now here’s to the heavy stuff. There’s a lot of information, numbers and details. I find it important that you understand every page of this document before you sign it and this is why you sit down with your agent prior to signing to have any questions answered, but for this blog’s purpose I will breakdown the top items to understand.

Sales Price: This is your total purchase price. It is broken down by your cash portion brought to closing and your borrowed funds through your loan.

Earnest Money: This is typically 1% of the purchase price of the property. You’ll input to amount and what title company you’ll be using (both the earnest money and title company are negotiable). This is credited at closing.

Title Policy: The seller normally pays for the title policy, but this is negotiable.

Survey: The title company and your lender will likely need a good survey on file but sometimes a neighborhood plat works. If the seller has a survey on file then great! If not, this is something to consider whether the buyer or seller purchases. Depending on the property, they can be pricey.

Property Condition: Allows for you to conduct inspections, confirms you’ve received a seller’s disclosure about the property and acceptance of the property. The main takeaways from this portion is to ensure you’ve received and thoroughly reviewed the seller’s disclosure (if applicable for the property) and accept the property as is. Yes, you will still have an inspector come out to the property, but the main reason you wouldn’t accept the property as is would be if the roof must be repaired and other major defects that could be there and are obvious.

Residential Service Contracts: It’s always nice to have a home warranty on the property to protect your HVAC or hot water heater. You will determine what type of home warranty you prefer with your agent and input the price in the contract. You don’t have to ask for one, but they’re great and this is typically covered by the seller for the buyer.

Closing: This is the determined date you plan to close on the property. There is always a possibility the date can move up or be pushed back. It’s typically pushed out 30 to 45 days from the day of signing the contract.

Possession: You’ll either have possession of the property upon closing and funding or there will be a leaseback on the property. Leasebacks are needed if the seller needs more time to move out or buyer needs to move in earlier.

Settlements and Other Expenses: Are you needing closing cost assistance? This is the portion where you would put that amount. Your lender will know what your financial situation looks like and can guide you on this aspect.

Termination Option: This is the timeframe that you’ll use to have your inspection conducted. You can negotiate the amount of days and the amount of money paid to the sellers. People typically ask for 7-10 days and pay $100. This is credited at closing. Your termination option begins the day after the contract is executed.


While this does not include every little piece of wording in the One to Four Family Residential Contract, it does give you a good idea and understanding of what you’re signing. Your REALTOR® is there to protect you and answer any questions you may have when signing a contract. They always have your best interest, it’s our responsibility! Remember that no question is stupid, so ask away!

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