Family Residential Contract Created By The Texas Real Estate Commission

Buying or selling a home could be complicated if one is unfamiliar with the process. This article will aim to familiarize the reader with that process and will discuss the most important segments of the One to Four Family Residential Contract by the Texas Real Estate Commission.

Article 06 by Houston Real Estate Lawyers | (832) 509-0445

TREC Forms

What is the Family Residential Contract Created by the Texas Real Estate Commission?

The Texas Real Estate Commission (TREC) has created a contract (the TREC Contract) called the One to Four Family Residential Contract, sometimes referred to as the Texas Real Estate Contract. This contract is the most commonly used residential contract in the state of Texas and is readily available on the TREC’s website, along with other TREC promulgated forms.


Real Estate Contract Texas

What does the One to Four Family Residential Contract Outline?

The One to Four Family Residential Contract (Contract) outlines important and necessary aspects of a residential contract. The Contract outlines the following provisions:

  1. Parties
  2. Property
  3. Sales Price
  4. License Holder Disclosure
  5. Earnest Money
  6. Title Policy and Survey
  7. Property Condition
  8. Broker’s Fees
  9. Closing
  10. Possession
  11. Special Provisions
  12. Settlement and other Expenses
  13. Prorations
  14. Casualty Loss
  15. Default
  16. Mediation
  17. Attorney’s Fees
  18. Escrow
  19. Representations
  20. Federal Tax Requirements
  21. Notices
  22. Agreement of Parties
  23. Termination Option
  24. Consult an Attorney Before Signing

Parties, Property, and Property Condition

These provisions require an accurate spelling of the full legal names of both the buyer and seller; an accurate and legal description of the property that is the subject of the contract. The description of the property should include the exact street address and all items that are not included in the sale.

Prior to the signature of the Contract, the buyer has the legal right to inspect the property listed in the Contract. The Seller has a legal duty to allow for inspection and to provide the buyer with a disclosure statement about the property’s condition. It is monumentally important to review this statement and ask as many questions; this could prevent the buyer from buying a property that is not to the expected standards.

Sales Price & License Holder Disclosure

For Sale By Owner Contract Texas

The sales provisions require the listing of all cash to be paid and the financing options, if any. The License Holder Discloser section outlines the responsibility of a real estate license holder who is a party to the transaction to disclose that information. The section concerning “Broker’s Fees” are governed by an agreement other than the Contract.

Earnest Money, Title Policy and Survey, & Escrow

Earnest money is the reasonable amount of money to be delivered to the title company with the Contract; in the event of a breach this amount will be paid to the seller of the property. The Title Policy and Survey section is negotiable between the parties to the Contract. It is important to note that this section is lengthy, contains deadlines, and could be complicated; it is best to have an attorney thoroughly explain this portion while reviewing the contract.

Escrow is the procedure in which the title company is to return the earnest money.

Closing & Possession

The closing date is agreed to by the parties, both buyer and seller. At the time of closing, transfer of ownership of the real estate occurs. All documents concerning the property should be thoroughly reviewed prior to and after closing. Once closing occurs, the buyer will have the legal right to possession of the property, unless otherwise agreed.

Settlement and Other Expenses & Prorations

The buyer and seller can agree on how to allocate expenses and the title company closer will prepare a statement based on those allocations. At the time of closing, the statement provided by the title company closer should be compared to the statement in the Settlement and Other Expenses section of the Contract.

The Prorations segment describes how the expenses of the sale are to be divided between the parties. These expenses will include payments such as the applicable real estate tax.

Casualty Loss & Default

The Casualty Loss segment is extremely important, it determines which party bears the risk of loss in the event that the property is damaged prior to closing. The Default section describes what would happen in the event that there is a breach to the contract.

Mediation & Attorney’s Fees

In the event that there is a dispute between the parties to the Contract, the mediation segment offers the parties the option for a mediation. However, if a lawsuit were to arise out of the dispute, the Attorney’s fees segment allows the winning party to recover attorney’s fees.

Representations & Termination Options

The representations section makes all “covenants, representations and warranties in this contract survive closing. If any representation of Seller in this contract is untrue on the Closing Date, Seller will be in default.” This section will also allow the seller to continue to show the property, unless otherwise agreed in the contract.

The Termination Option allows the buyer may terminate the contract for any reason if the buyer pays the consideration agreed to in this section.

Consult an Attorney

Texas Real Estate Contract Law

According to the TREC, a realtor is prohibited from giving legal advice to the parties. This segment of the Contract encourages the parties to consult an attorney to fully review and consult the parties prior to signing. As mentioned above, real estate transactions can tend to be complicated. It is best to have an attorney present in all stages of the transaction.