How To Buy A House in Texas

From Contract to Close

Real Estate 101

In case you plan to usher out the old year and welcome in the new with a real estate transaction, here is a little heads-up on the people and terminology involved.  

In Texas we sell and purchase real estate only by a written instrument.  It just isn’t enough to say “Give me $200 and the North 40 is yours.”  

The document that transfers ownership in real estate is a deed.  

We do not use mortgages.  Instead, we use a document called a deed of trust

Your written obligation to pay the lender is called a promissory note.  

Most people use an agent to help buy or sell the land.  Texas is picky about agents, who are required to be licensed by the Texas Real Estate Commission (“TREC”). The same agent cannot represent both sides of a real estate transaction.  The agent cannot receive a commission on the sale unless he or she has a written agreement, called a Listing Representation Agreement (for the seller) or a Buyer Representation Agreement (for the buyer).  A real estate agent has to use the form provided by TREC, by the Texas Association of Realtors, or created by a real estate attorney.

Buying and Closing Real Estate Deals

The agreement to buy or sell the real estate must be in writing. It is usually called an earnest money contract. Most closings take place through a title company, which acts as an escrow agent and provides title insurance to the buyer and the buyer’s lender.  Sometime before closing, the title company provides the parties with a title commitment that spells out the title insurance terms and any exceptions. The title commitment is prepared by the title examiner or abstractor.

Title commitments should always be carefully reviewed, with special attention paid to Schedule B exceptions and Schedule C requirements.  

After closing, the buyer will receive an owner’s policy of title insurance that protects the policy holder against loss due to title defects, claims of ownership, liens or other matters not previously disclosed to the buyer.

What To Do Before You Close On A Real Estate Property

Most buyers have the property inspected during the option period of the contract. That allows them time to renegotiate the terms of the contract or terminate the contract if problems are found during the inspection. TREC licenses the inspectors. There are 3 levels of inspectors: apprentice, real estate and professional. The buyer may choose to purchase additional inspections for such things as pest/termite, foundation, sewer/septic and electrical.

Most contracts require a property survey.  This is done by a Registered Professional Land Surveyor.  

If the purchase is being financed by a third-party lender, then the lender will also require a formal appraisal.  Appraisers are licensed by the Texas Appraiser Licensing and Certification Board, under TREC.

For a new home, many people buy directly from a homebuilder.  This is dangerous because builders do not have oversight, they are not licensed, and they typically use their own forms. 

Note that, while it may be advisable to hire one,  an attorney is not required to negotiate, draft or close a real estate transaction.  

Virginia Hammerle is the President of Hammerle Finley Law Firm.   To sign up for the firm newsletter,  email legaltalktexas@hammerle.com.  Employment opportunities available.

This article does not constitute legal advice