Texas Real Estate Terms Explained | What These Words Actually Mean

Summary

Buying a home in Texas can feel overwhelming with terms like MLS, earnest money, option period, and escrow thrown around. This video breaks down these real estate terms in plain English, explaining what they mean, when they appear, and how they affect buyers. From navigating listings and understanding pre-approval, to contracts, contingencies, appraisals, and closing processes, viewers gain practical insights into each step. Texas-specific details like the option period, TREC forms, and title practices are highlighted. With clear explanations and actionable tips, the video empowers first-time and seasoned buyers to confidently navigate the Texas homebuying journey without confusion or surprises.

Takeaways

• 🏠 Understanding MLS (Multiple Listing Service) is crucial; it provides the most accurate, real-time listing information compared to public sites like Zillow.
• 📊 Comps (comparables) help determine a home's fair market value by comparing recently sold similar properties.
• ⏱️ Days on Market (DOM) indicates demand; low DOM suggests high interest, while high DOM may indicate negotiation opportunities or potential issues.
• 💳 Pre-qualification gives a rough estimate of borrowing power, while preapproval involves verified financials and strengthens your offer.
• 📉 Debt-to-Income (DTI) ratio affects mortgage eligibility; even with good credit, a high DTI can limit options.
• 💰 Private Mortgage Insurance (PMI) protects lenders if down payment is under 20% and can typically be removed once 20% equity is reached.
• 📝 The Option Period in Texas allows buyers a short window to back out for any reason by paying a non-refundable fee.
• 💵 Earnest Money is a good faith deposit that can be applied to closing costs or forfeited if a buyer backs out without legal reason.
• ⚖️ Escrow ensures all money and documents are safely held by a neutral third party until contract conditions are met.
• 📜 Title Policy and Survey protect buyers from ownership disputes and confirm property boundaries, though costs and responsibilities are negotiable.
• 🏦 Appraisals, conducted by lenders, confirm property value to protect the loan; low appraisals may require renegotiation or additional cash.
• 📄 Closing Disclosure and Settlement Statement outline all costs and financial details for review before closing.
• 🔑 Funding and Possession mark the official completion of a purchase, while Recording makes ownership public record.

Q & A

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The MLS (Multiple Listing Service) is a master database where agents post and search for homes. It provides the most accurate and real-time view of available properties. Sites like Zillow pull from it but may not be completely up-to-date, so having an agent’s MLS access ensures you don’t miss new listings or changes.

What are comparables (comps) and how are they used?

Comps are recently sold homes similar to the property you’re buying or selling. They help determine fair market value and guide pricing and offer decisions by comparing properties of similar size, location, and features.

What does 'Days on Market' (DOM) indicate about a property?

DOM shows how long a home has been listed. A low DOM usually indicates high demand, while a high DOM might signal potential price flexibility or a red flag. A skilled agent can interpret what DOM really means for a specific property.

What is the difference between pre-qualification and pre-approval?

Pre-qualification is a rough estimate of what you might afford and requires no documentationQ&A development from script. Pre-approval is more formal, requiring financial documents and credit verification, and makes your offer stronger when buying a home.

Why is debt-to-income (DTI) important in the home buying process?

DTI measures the percentage of your monthly income that goes toward debt. Lenders use it to determine if you can handle a mortgage. Even with good credit, a high DTI can limit your borrowing capacity.

What is PMI and when is it required?

PMI (Private Mortgage Insurance) protects the lender if your down payment is less than 20%. It does not protect the buyer. PMI can usually be removed once you reach 20% equity in the home.

What is the 'option period' in Texas real estate?

The option period is a short window, usually 5–10 days, that allows the buyer to back out of a contract for any reason by paying a non-refundable option fee. Missing the deadline for delivering the option check can result in losing the right to terminate the contract.

How does earnest money work in Texas home transactions?

Earnest money is a good faith deposit, typically 1% of the purchase price, held by the title company. If the deal closes, it goes toward closing costs. If the buyer backs out without a valid reason, they could forfeit it. Legal terminations usually allow the earnest money to be refunded.

What is the role of escrow in Texas real estate?

Escrow is a neutral third party, usually a title company, that holds money and documents until all contract conditions are met. This ensures no one receives money or keys prematurely and keeps the transaction secure and fair.

What does a title policy cover and who typically pays for it in Texas?

A title policy protects against legal claims on the property, such as liens or ownership disputes. In Texas, sellers often pay for the buyer’s title policy, but this is negotiable.

Why are appraisals required and who benefits from them?

Appraisals confirm the home’s value and are primarily for the lender’s protection. If the appraisal comes in low, the buyer may need to renegotiate the price or pay the difference. Cash buyers or those with large down payments may not need an appraisal.

What is the difference between funding and possession in a home purchase?

Funding occurs when the lender releases the money and the home legally transfers to the buyer. Possession is when the buyer receives the keys, which may happen immediately after funding or later, depending on negotiations.

What is recorded during the property recording process?

Recording officially registers your deed with the county, making your ownership public record. It often happens the same day as funding but may take longer in some counties to appear online.