Option period
Also called the termination option
A set number of days at the start of the contract during which you can walk away from the purchase for any reason at all, and get your earnest money back. You pay a separate fee for that right, and that fee is not refundable.
Two things people get wrong. The first is that the clock is in calendar days, not business days, and it starts the day after the contract is executed. A weekend and a holiday do not pause it. The second is that it does not extend itself because an inspector could not come out in time, or because a lender is slow. If the days run out and you have not terminated in writing, the option is gone.
What it means for you: this is the only stretch of the contract where you can change your mind without losing money, so it is where the inspection, the contractor bids and the hard questions belong. Once it closes, your leverage changes completely.
Earnest money
Not a down payment, and not a fee
Money you deposit with the title company when the contract is signed, to show the seller you are serious. It is not a payment to the seller and it is not extra cost: at closing it is credited toward what you owe.
It becomes a real risk only if you default after your contingencies have expired. Terminate during the option period and it comes back to you. Terminate because financing genuinely fell through within the financing deadline and it generally comes back too. Walk away after those windows close, for a reason the contract does not protect, and the seller has a claim to it.
What it means for you: the amount is negotiable and a larger deposit can make an offer more credible without raising the price. It is one of the few levers that costs you nothing if you close.
Seller's disclosure notice
Texas form, filled out by the seller
A form on which the seller states what they know about the property: past repairs, previous flooding, structural work, known defects, whether it is in a flood zone, what has been replaced and when. Most Texas sellers are required to provide it, with some exemptions, such as certain estate and foreclosure sales.
It records what the seller knows. It is not a condition report and it is not an inspection. A blank line can mean the item is fine or can mean nobody ever looked, and the form does not distinguish between the two.
What it means for you: read it next to the inspection report rather than instead of it. Where the two disagree, that gap is the conversation worth having before your option period ends.
Title commitment
Sometimes just called the title work
The title company's written statement of what it found in the property's records and under what conditions it will insure your ownership. It lists who actually owns the place, what liens are against it, and every easement, restriction and exception that runs with the land.
Schedule B is the part worth your attention. It is the list of things the policy will not cover, and that is where you find the utility easement across the back yard, the deed restriction on what you can park in the driveway, or the mineral rights somebody severed decades ago.
What it means for you: you have a limited number of days to object to items in the commitment, and that window is usually shorter than people assume. Read it the day it arrives, not the week before closing.
Survey and the T-47 affidavit
T-47 is the Texas residential real property affidavit
A survey is the drawing that shows where the property lines actually run, along with the improvements on the lot: the house, the driveway, the fence, the shed. The T-47 is a sworn statement from the seller that nothing has changed since that survey was made.
If the seller provides an existing survey plus a signed T-47, the title company can often use it instead of requiring a new one. If the seller will not sign it, or something has changed, a new survey gets ordered and somebody pays for it. The contract says who.
What it means for you: this is how fence disputes and encroachments get found before closing rather than after. When a seller declines to sign the T-47, that is information, and it is worth asking why.
Appraisal gap
What happens when the appraisal comes in low
Your lender will lend against the appraised value, not against the price you agreed to. If the house appraises below the contract price, the difference is the gap, and it has to come from somewhere: the seller lowers the price, you bring the difference in cash, you meet in the middle, or the contract ends under the appraisal provision.
In a market with a lot of inventory this comes up less than it did, because prices are not running ahead of the comparable sales the appraiser uses. It still happens on unusual properties, on new construction, and any time a bidding situation pushes a price past what recent sales support.
What it means for you: know before you offer how much of a gap you could cover in cash, if any. That number decides how aggressive you can safely be.
Under contract, pending, and active under contract
Three different statuses that look the same from outside
Active under contract means a contract is signed but the seller is still accepting backup offers, usually because a contingency is still open. Pending means the seller has stopped taking backups and expects to close. Active means it is still on the market.
On the public sites these often blur together into "sold" or simply disappear, which is why a house you liked seems to vanish and then reappear three weeks later.
What it means for you: "active under contract" is not a closed door. Roughly speaking, a share of contracts fall apart during the option period, and a backup offer on a house you love costs you nothing to write.
HOA resale certificate
And the governing documents that come with it
A packet the homeowners association produces for a sale. It states the current dues, whether the seller owes anything, what transfer fees you will pay at closing, whether there is a special assessment coming, and whether the association has any open violations against the property.
It arrives with the governing documents: the declaration, the bylaws and the rules. Those are what tell you whether you can put up a fence, run a short-term rental, park a work truck in the driveway or install solar panels.
What it means for you: the dues are the easy number. The expensive surprises are the assessment nobody mentioned and the restriction that rules out the reason you wanted the house. Both are in the packet, and both need reading before the option period ends.
Buyer representation agreement
The Texas form that makes an agent yours
The written agreement that makes an agent legally your representative rather than just someone opening doors. It sets out what they owe you, how long the agreement runs, which areas it covers, and how they are compensated.
Without it, an agent showing you a house is not representing your interests in the transaction. With it, they owe you loyalty, confidentiality and disclosure, which are the things you actually want when the negotiation gets uncomfortable.
What it means for you: compensation is written into it from the start rather than left vague, so you know the terms before you are emotionally attached to a house. Everything in it is negotiable, including how long it lasts and what happens if it does not work out.
Homestead exemption
The one people forget to file
If a house is your principal residence, Texas lets you take part of its value off the amount your property taxes are calculated on. You file it once with the county appraisal district, and you have to actually file it: nobody applies it for you, and owning the house is not enough.
It does two things. It lowers the taxable value, and it caps how much that taxable value can rise from one year to the next while you live there, no matter what the market does around you.
It also does not travel. It belongs to the house you live in, not to you. Move out and rent the old place, and it comes off that house, which is where people get surprised.
What it means for you: if you bought recently, check that it is on file. I have looked at a bill and found an exemption that was never filed, which means every year of ownership was overpaid. If you are turning a home into a rental, plan for the bill to change.
If the exemption is not the only thing on the bill
If you think the county has your property valued too high, you can protest it yourself for free, and plenty of people do. If you would rather hand it off, Ownwell files the protest for you and charges only if they win.
See how Ownwell works ›
Evelyn Vallin may receive compensation from Ownwell for customers who sign up through this link. Protesting your own appraisal with the county costs nothing, and Ownwell is not the only service that does this.
The appraisal cap on non-homestead property
Not the same thing as cap rate
Texas put a temporary limit on how much the appraised value of property that is not your homestead can rise in a year. It covers rentals, second homes and commercial property under a value threshold, and it was written as a pilot with an expiration date rather than as a permanent rule.
Most owners who are benefiting from it have no idea it exists, because it shows up as a number that did not go up rather than as a line item that says what it is.
The rule is temporary and its conditions can change, so the number that matters is the one your county has on your property. The Texas Comptroller keeps the directory of every county appraisal district, and the district is who answers questions about exemptions and values: find your county appraisal district.
Worth being precise about the name: this is an appraisal cap, a limit on taxable value. Cap rate is a different thing entirely, the investor's measure of net operating income against purchase price. The two get mixed up constantly and they have nothing to do with each other.
What it means for you: if you own rental property in Williamson or Travis, this affects your numbers, and it is worth knowing when it ends so the change does not arrive as a surprise. Confirm the current rules and dates with the county appraisal district or your tax advisor, since this one has a clock on it.
Your mortgage rate, and whether it can move
Assumability and rate portability
If you locked a low rate years ago, that rate belongs to that loan on that house. Sell, and you give it up and borrow again at whatever the market is now. That is the single biggest reason people who want to move are not moving.
There are two partial ways around it. Some loans are assumable, meaning a qualified buyer can take over the existing loan and its rate instead of getting a new one. And there have been legislative proposals to make a rate portable, so an owner could carry it to the next house, though that is a proposal and not something you can count on today.
What it means for you: if your rate is the only thing keeping you in a house that no longer fits, it is worth checking what kind of loan you actually have before you decide you are stuck. And if you are buying, an assumable loan on a listing is a real advantage that most buyers never think to ask about.
Escrow
Who is actually holding the money
Escrow is a neutral third party holding money and documents while a transaction is in progress, so neither side has to trust the other with it. In Texas that party is usually the title company. Your earnest money goes there, not to the seller, and it sits there until closing or until the contract says who gets it.
The word gets used for a second thing too, which is where the confusion comes from. After closing, a lender may hold an escrow account that collects part of your property taxes and insurance with each mortgage payment and pays those bills when they come due. Same word, different job.
What it means for you: when someone says the money is in escrow, it means nobody can touch it unilaterally. That is the protection. And when a lender says your payment is going up because of escrow, that is usually the tax or insurance bill changing, not the loan.
Home inspection
Done by a licensed inspector, not by your agent
An inspection is a licensed third-party professional going through the house and writing up its condition: roof, foundation, electrical, plumbing, HVAC, appliances, drainage. You hire them, you pay them, and the report is yours.
It is not a pass or fail, and it is not a repair estimate. A long report on a well-built house is normal, because an inspector writes down everything, including items that are simply old. The skill is in telling apart what is a real problem from what is a note.
I am not the inspector and I do not evaluate the house myself. What I do is read the report against the contract, find what is worth raising, and handle the negotiation that comes out of it while your option period is still open.
What it means for you: the inspection is not there to scare you off the house. It is there to give you leverage, and that leverage only exists while the option period is open. Schedule it the day you go under contract, not halfway through.
Cap rate
Capitalization rate. Not the appraisal cap.
An investor's measure of what a property earns against what it costs. You take the income it produces in a year after operating expenses, and you divide that by the purchase price. Everyone in real estate says it and very few explain it.
A higher number generally means more income relative to price. A lower number generally means you are paying for something other than current income, usually expected appreciation or a location. Neither is automatically better: they are different bets, and which one fits depends on whether you need the property to pay you now or to be worth more later.
What it does not include is your financing. Cap rate treats the property as if you paid cash, which is why two buyers with different loans can look at the same cap rate and get very different results.
Not to be confused with the appraisal cap, which is a limit on taxable value and has nothing to do with this.
What it means for you: if you are comparing rentals, cap rate is the fastest way to line them up on the same scale. Just make sure the expense side is honest, because the number is only as good as what got left out of it.
New construction, and the builder's vocabulary
Base price, lot premium, standard versus upgrade, spec home
A builder's sales office runs on its own language, and every one of those words has money attached. Base price is the house with nothing added. Lot premium is what they charge for the specific piece of land. Standard is what comes included and upgrade is what does not. A spec home is one they already built without a buyer, which is usually where the negotiation room is.
New construction against an existing home is not a question with a universal answer. New gives you a warranty, current systems and a blank slate. Existing gives you mature trees, a bigger lot for the money, and a neighborhood you can actually see rather than imagine.
What it means for you: on a new build the sticker price is rarely where the negotiation is. It is in the incentives, the upgrades and the terms of the builder's own contract, which is their paper and not the standard Texas form. Bring representation before you sign in at the sales office, because that first visit can determine whether you are allowed any.
Days on market
And why the number is often wrong
How long a listing has been active. It matters because it is the single best public clue about whether a price is realistic.
The catch is that the counter can be reset. Withdraw a listing and relist it and the count starts over, so a house showing seven days may have been sitting for four months under a different listing. The full history is in the MLS, not on the public sites.
What it means for you: before you offer on anything, ask for the property's actual history: previous listings, previous prices, and whether it has been under contract before and come back. I pull that on any address you send me.