If you’ve been a Realtor® for several years, you’ve probably seen a few iterations of the Texas Real Estate Commission (TREC) contract forms. TREC strives to listen to input from license holders and to continually improve the forms that are used for Texas real estate transactions. Improvement usually means change, and change means there are a few things you need to know before you write your next contract.
TREC met on February 12th, 2018, and approved revisions to several current forms and also adopted two new forms. These forms are available for use now on the TREC website and have a mandatory use date of May 15th, 2018. Here’s what you need to know:
- You must use the Addendum for Reservation of Oil, Gas and Other Minerals if you want to reserve any mineral rights.
Earnest money needs to be delivered to the escrow agent within 3 days of the contract Effective Date.
- If the buyer fails to deliver the earnest money within 3 days, the seller may terminate the contract.
- There are conditions on how this termination can take place, and you can read more about the elements of earnest money receipt, including how TREC considers weekends and holidays as pertains to the 3-day deadline, here Read more about the elements of earnest money receipt.
- Your buyer now has a defined “Cure Period” to notify the seller if they wish to terminate or waive any objections. Additional time periods can also be added if a revised commitment, survey or exception documents are received.
- Effective Date is now a defined term throughout the contract. You will now notice this term capitalized through all contract forms so that in case of any legal action, it will be legally recognized as a defined term.
- The receipt page now has separate areas for the contract and earnest money to be receipted.
- The escrow agent will need to indicate what time the earnest money is delivered on the earnest money receipt page (this impacts the seller’s right to terminate).
- And most importantly, there is no longer a need to include your Broker’s fax number on the receipt page!
For a complete review of the contract form changes please review A Summary of Contract Form Revisions.
Click here for a copy of the revised TREC Contract.
Along with these changes, there are also two new forms:
Addendum for Authorizing Hydrostatic Testing: This addendum gives license holders a promulgated form to comply with the requirement in the contract that the seller must authorize any hydrostatic testing in writing. The form also provides a space to indicate who will pay for any damages.
Addendum Concerning Right To Terminate Due To Lender’s Appraisal: This addendum is the long-awaited form that many license holders have requested. The form gives three options for the parties to agree how the contract will proceed if the lender’s appraisal does not meet the lender’s underwriting requirements. Keep in mind that this form can only be used for transactions involving conventional financing.