Lessons In Buying a House: The $116 Lesson–Yours for Free

I am in the process of trying to find and purchase a house–my first one. It doesn’t matter how many times you watch HGTV’s “My First Place” and “House Hunters”, going through the actual process has many more details and, in my opinion, many more aggravations. The best information that I got was through a couple of home-buying classes that I took through Leisure Learning here in Houston. However, they didn’t prepare me for this lesson. There have been other lessons that I want to explain, but since this is the first that has cost money, and the most recent sore spot, I’ll start here.

Also be aware that I’m doing this in Texas, so the laws and the ways houses are bought and sold where you live might be different.

Anyway, here goes. When the buyer finds a house that he likes, he makes an offer to the seller. If the seller agrees to the offer, the seller and buyer sign papers which make a commitment for you to buy and them to sell. (It’s kind of like getting engaged. The marriage is the closing.) When that commitment is made, the buyer must put down some money as security that he will continue the buying process; the big chunk is called earnest money and goes into an escrow account at a title company, and a small chunk, called the termination option, goes to the seller. Both of these “chunks” will be applied to the buyer’s closing costs if the buyer doesn’t back out of the deal.

Now here is the lesson–my $116 lesson. As a buyer, do not give checks for either the earnest money or the termination notice until the seller has signed all of the necessary papers to finish his side of the commitment. My agent had me give her checks for these the day I made my offer; then the name was incorrect on one check and the sellers wanted more earnest money put down, so I had to write two more checks and took them to the seller’s agent’s office because it is near where I live.  There’s no legal reason why you have to give the agents that money yet; they just want you more emotionally committed to the sale.

It’s supposed to be a buyer’s market, but the sellers of the house I wanted would not budge on anything. In fact, the straw that broke the camel’s back for me was that they wanted to stay in the house for several days after closing without paying anything and didn’t want to put anything in writing about when they would move out. Therefore, I withdrew my offer before they had even finished with their part of the commitment papers.

However, at that point, I had four checks hanging out there with people I don’t really trust, so immediately upon making my decision about not purchasing that house, I went to Wells Fargo and put a stop payment on each one–at $29 a pop. Though I now have gotten the checks back, at that point I wasn’t sure if I would.

In the end, the lesson for the buyer is: don’t put out earnest money or termination option money until you have all of the papers from an offer (the commitment) which you and the seller have both signed.