Houston Real Estate Buyers FAQ

People & Roles

What is a Texas real estate agent?

A Texas real estate agent is a person licensed by the Texas Real Estate Commission (TREC) to represent clients in buying, selling, leasing, or managing real estate. Texas officially calls them “real estate salespersons.” Every agent must work under the supervision of a licensed Texas real estate broker.

What is a Texas real estate broker?

A Texas real estate broker is a licensed professional who has completed advanced education and experience requirements beyond a salesperson’s license — including a minimum of 270 hours of qualifying real estate courses, 630 hours of related education, four years of active license experience, and passage of the Texas broker exam. Brokers can operate their own firms and supervise teams of agents.

What is a REALTOR®?

A REALTOR® is a real estate agent or broker who is a member of the National Association of REALTORS® (NAR). REALTORS® commit to a Code of Ethics that goes beyond what state licensing requires. All REALTORS® are real estate agents or brokers — but not all agents are REALTORS®. Membership is generally required to access local MLS systems.

What is a buyer’s agent?

A buyer’s agent is a real estate agent who represents the buyer’s interests in a transaction — not the seller’s. In Texas, listing agents represent the seller exclusively, which is why having your own buyer’s agent matters during negotiation, inspections, and closing.

How is a buyer’s agent paid?

Following industry changes that took effect in August 2024, buyer’s agent compensation is now negotiated up front and spelled out in a written buyer representation agreement before home tours begin. In many Houston-area transactions, the seller still contributes toward the buyer’s agent fee — this is negotiated as part of the offer. In some transactions, the buyer pays directly. The key change is that compensation is now transparent from day one, with no surprises. I’ll walk you through exactly how this works at our first conversation.

What is a buyer representation agreement?

A buyer representation agreement is a written contract between you and your buyer’s agent that defines the agent’s duties, the term of the relationship, and how the agent will be compensated. As of August 2024, MLS-participating agents are required to have one in place before showing properties. The terms — including length, scope, and compensation — are negotiable.

The Purchase Contract

What is an earnest money contract?

An earnest money contract is the standard real estate purchase agreement used in Texas. When the buyer signs, they deposit a small percentage of the sales price with a title company as good-faith evidence of intent to purchase. The earnest money is held in escrow until closing, at which point it’s applied toward the buyer’s funds at the closing table. The exact amount is negotiable.

What is the option period?

The option period is a defined window of time after contract signing during which the buyer has the unrestricted right to terminate the contract for any reason and receive their earnest money back. The buyer pays a small “option fee” to the seller for this right. In Houston, option periods are typically 5–10 days. Option fees vary with market conditions and the property — they may range from a few hundred dollars to several thousand on higher-priced homes. The option period is when home inspections happen and when any repair requests are negotiated.

What is a termination option in a Texas earnest money contract?

The termination option is the contract clause that creates the option period (above) and gives the buyer the unconditional right to terminate during that window. Earnest money contracts that include this clause are sometimes called “option contracts” for that reason. The option fee must be delivered to the seller within three days of the contract’s effective date or the right to terminate under this clause is lost.

What is a financing contingency?

A financing contingency lets a buyer terminate the contract and recover their earnest money if they’re unable to obtain mortgage financing within a defined period — typically 7–21 days, negotiated up front. The buyer doesn’t have to be formally denied; they must provide written notice during the contingency window. A financing contingency protects buyers who are financing the purchase from losing earnest money over a loan that doesn’t come together.

What is a mortgage pre-approval letter?

A mortgage pre-approval letter is a written statement from a lender confirming that — based on a review of your income, assets, and credit — they’re willing to lend you up to a specific amount. Houston-area sellers expect a pre-approval letter to accompany any financed offer, and most won’t seriously consider an offer without one. Pre-approval is different from pre-qualification, which is a quick estimate based on stated information and isn’t verified by the lender.

What is a home warranty?

A home warranty is a service contract that covers the repair or replacement of major home systems and appliances — HVAC, plumbing, electrical, water heater, kitchen appliances — for a defined period after closing, usually one year. Coverage and exclusions vary by provider. In Houston-area transactions, it’s common for buyers to request that the seller pay for a one-year home warranty as part of the contract negotiation.

Title, Insurance & Closing

What is a title company?

A title company is a licensed third party that handles the closing process in Texas. It holds the buyer’s earnest money in escrow, researches the property’s title history, issues a title insurance policy, prepares the deed and closing documents, and disburses funds at closing — paying off the seller’s existing mortgage and any liens before transferring clear title to the buyer.

What is an owner’s title policy?

An owner’s title policy is title insurance that protects the buyer against losses arising from defects in the property’s title that existed before closing — undisclosed liens, boundary disputes, forged signatures in the chain of ownership, and similar issues. It’s a one-time premium paid at closing and protects you for as long as you own the property. In most Texas transactions, the seller pays for the owner’s title policy as a customary cost.

Why do I need homeowners insurance?

Homeowners insurance protects you financially if your home is damaged by fire, storms, theft, or other covered events. If you’re financing the purchase, your lender will require it. Even cash buyers should carry it — replacing a Houston-area home after a fire or major storm event without insurance can be financially catastrophic. With Houston’s hurricane exposure, also confirm whether your policy includes wind coverage and whether you need separate flood insurance (most standard policies exclude flood damage).

What does it mean if a listing is “pending” or “under contract”?

“Under contract” means the seller has accepted an offer and the property is in the option period or actively progressing through inspections, financing, and closing. “Pending” typically means the option period has ended and most contingencies have been satisfied — the sale is moving toward closing. Either status means the property is not actively available, though some buyers do make backup offers in case the primary contract falls through.

Special Situations

What is an REO listing?

REO stands for “Real Estate Owned” — a property that has been foreclosed on and is now owned by a bank or other mortgage lender. REO properties are typically sold “as-is” and can offer below-market pricing, but they also often come with deferred maintenance and more rigid contract terms. They can be good opportunities for buyers willing to do some work.

What is a short sale?

A short sale is a transaction in which the homeowner is selling for less than they still owe on the mortgage, and the lender agrees to accept the shortfall to avoid foreclosure. Short sales require lender approval and can take an additional 30–90 days to close compared to a traditional sale. They can offer good value but require patience.

What does “multiple offers” mean?

“Multiple offers” means the seller has received more than one offer to purchase the property at the same time — common with well-priced or high-demand Houston-area listings. When this happens, the seller may accept one outright, counter their preferred offer, or request all buyers submit their “highest and best” offer (see below). Multiple offer situations require a strong opening offer, fast decision-making, and clear strategy from your buyer’s agent.

Why would a seller ask for my “highest and best” offer?

When a seller has multiple offers on the table, they may ask all interested buyers to submit a single “highest and best” offer by a specific deadline. This gives every buyer an equal opportunity to put their strongest terms forward, while letting the seller compare final offers side by side and select the winner without back-and-forth negotiation. Your buyer’s agent will help you think through price, terms, financing strength, and timing to construct the most competitive offer for your situation.

What is a seller leaseback?

A seller leaseback is a contract provision that lets the seller stay in the home for a defined period after closing — usually to give them time to move into their next home. Terms vary: sometimes the seller pays daily rent to the buyer; sometimes it’s at no cost as part of the negotiation. Leasebacks are common when the seller is buying their own next home and timing doesn’t line up exactly. I recommend buyers consider this carefully and document it precisely in the contract.

The MLS

What is the MLS?

The Multiple Listing Service (MLS) is a database of properties for sale that real estate brokers share with one another. When a property is listed on the MLS, every member agent can show it to clients. Houston is served primarily by the Houston Association of REALTORS MLS, with separate MLS systems for Bryan–College Station and Brazoria County. The MLS is the source data behind public sites like HAR.com and Zillow, though those public sites often lag behind the live MLS by hours or days.

What is an MLS listing?

An MLS listing is any property a member broker has placed on the MLS for sale or for rent. Once listed, the property is visible to all member agents and their buyers, which is why working with one buyer’s agent gives you access to every MLS-listed home in the area.

How does the MLS benefit me as a buyer?

With one buyer’s agent, you can tour any property listed on the MLS — regardless of which brokerage has the listing. You don’t need to call separate agents for every “for sale” sign you see. Your agent can also set up automated alerts that notify you of new listings matching your criteria the moment they hit the MLS.

Houston-Area Terms

What does ETJ stand for?

ETJ stands for “Extraterritorial Jurisdiction” — the area surrounding a city’s incorporated limits where the city has limited authority over subdivision platting and some land-use regulations, but doesn’t provide full city services or collect city taxes. Many Greater Houston neighborhoods sit in Houston’s ETJ, which affects services, taxes, and future annexation prospects. It’s worth understanding before you buy.

What is an ISD?

ISD stands for “Independent School District.” Texas public schools are organized by school district, and your home’s address determines which ISD — and which specific schools — your children would attend. Greater Houston has dozens of ISDs (Cypress- Fairbanks, Katy, Klein, Spring Branch, Tomball, and many more), each with its own quality ratings, programs, and tax rates. School zone is often a top factor in home choice, and I can help you identify homes within specific ISDs or schools.

What is a MUD district?

MUD stands for “Municipal Utility District” — a political subdivision created to provide water, sewer, drainage, and sometimes other services to areas outside city limits that lack municipal service. Many newer Greater Houston subdivisions (especially in Cypress, Katy, and outlying areas) are in MUDs. MUDs levy property taxes to fund their infrastructure, which means buyers should always check the total tax rate (ISD + MUD + county + any other special districts) rather than just the listed property tax line.

What is an HOA?

HOA stands for “Homeowners Association” — a private organization that manages and enforces rules for a residential community, typically a subdivision or condo development. HOAs collect dues from owners to maintain common areas, amenities (pools, parks, walking trails), and enforce deed restrictions covering things like home appearance, fencing, and landscaping. When buying, review the HOA’s bylaws, dues, financial health, and any pending special assessments before closing.

What’s the difference between property taxes and total tax rate?

Texas has no state income tax, which contributes to relatively higher property tax rates than other states. Your total property tax rate is the sum of all the taxing entities that overlap your property — usually county, city (if inside city limits), ISD, MUD (if applicable), and any special districts like emergency services. Combined rates in Greater Houston typically fall between 2% and 3.5% of appraised value. Always look at the total rate, not just the headline number.

Ready to Get Started?

Have a question that’s not answered here? Or ready to start looking at homes? The first step is a quick conversation — no pressure, no obligation.

Schedule a Free Consultation Call (281) 500-7077

Kevan Pewitt, Realtor & Broker · Houston Prime Realty
7058 Lakeview Haven Dr, Suite 108, Houston, TX 77095