TREC 3-Day Rule Update

At the TREC Commission meeting on November 13th, the Texas Association of Realtors, along with concerned real estate professionals around the state, sent in letters to express concerns about the proposed three-day requirement for delivery of earnest money (Paragraph 5). In the revised standard TREC contracts, the proposed language currently reads, “Within 3 days after the Effective Date, Buyer must deposit $___ as earnest money with __, as escrow agent, at __(address).” Critics argued against the ambiguity of the language, pointing out that weekends and federal holidays could easily make this deadline impossible for some buyers. Vicki Fullerton, 2017 TAR Chairman, pointed out the flaw: “First, the Association echoes the concerns expressed by several of the Commissioners at the August 7th meeting, chiefly that the three-day time period may be problematic in some transactions. For instance, if the contract is executed on the Friday evening before Labor Day and the title company is closed, despite the buyer’s intention to perform, the seller may be able to terminate because of a mere oversight.” Most of the letter-writers agreed, some in stronger terms than others, but most agreed that there should be some distinction between calendar days and business days.

The Commission took notice, and the TREC Broker Lawyer Committee added a sentence to clarify Paragraph 5. Below is the current version up for comment. In black text is the original language that will remain; in blue text is the new proposed language; in red is the old language to be removed, and in green is the most recent addition to address concerns about the three-day requirement.

One realtor submitted a letter to the Commission pointing out that “it is the case that many title companies now employ systems which allow earnest money to be deposited electronically, but these are not universal.” Independence Title was one of the first title companies in Texas to accept earnest money electronically through Zoccam, a game-changing app that processes earnest money simply by using the camera on your phone. We’ve been offering electronic earnest money delivery since mid-2016, and more and more agents have been taking advantage of the convenience it offers. Using Zoccam, agents can send earnest money and contracts from anywhere, and they receive immediate email notifications letting them know the earnest money was delivered. And since the data is encrypted from capture to delivery, there is no financial information or check image left on the smartphone, so you can feel completely secure while using it.

So what’s next? For now, nothing is changing. The Commission moved that the staff was authorized to withdraw the current proposal for all amendments, revise the language again, and submit for re-proposal.  To see all the proposed amendments, the minutes of the last TREC Commission meeting can be found here (click on Meeting Materials part 2 on the right to download and see amendments starting on page 113.) January 12th, the Broker Lawyer Committee will meet again and discuss this issue; afterwards, they’ll publish a new version in the Texas Register for public comment. Currently, there’s no scheduled date for publication or deadline for comments, but we’ll keep you posted on new developments. In the meantime, TREC wants to hear from you, so feel free to submit comments and suggestions on this issue or any of the proposed amendments to general.counsel@trec.texas.gov.

 

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