What to Know About TREC Contract Changes
Spring is on the horizon, which means the start of new things, renewal, growth and the start of the selling season. When you consider how fast the market is moving already, it’s more important than ever to stop for a moment and pay careful attention to industry changes to avoid making mistakes that could cost you a transaction, as well as your reputation as a real estate professional.
One such change is the Texas Real Estate Commission’s (TREC) recent adoption of nine revised contract forms and two new contract addendums. These new contract forms become mandatory for use on Thursday, April 1, but can be used now on a voluntary basis. Here’s what you need to know about this big shift in our marketplace.
Know What’s Changing with the New Contract Forms
Last month’s TREC contract form changes impact the most-used real estate contracts in our marketplace, including the One to Four Family Residential Contract (Resale). If you haven’t already, please visit the TREC website to download the new forms and familiarize yourself with the changes.
The primary change in these new contract forms relates to the delivery of option fees. As of April 1, a buyer is required to deliver the option fee to the title company, not the seller. The buyer must deliver the option fee within three days after the effective date of the contract and the option fee can be paid jointly with the earnest money payment, if desired. Once the option fee is paid, the escrow agent may release and deliver the option fee to the seller at any time and the option fee will be credited to the sales price at closing.
The Texas Land Title Association is working with its members to ensure title companies are prepared to handle option fee payments. Please visit the TREC website for additional information on option fee delivery changes.
In addition, TREC adopted two new forms that are also mandatory effective April 1:
Addendum Regarding Residential Leases: This addendum covers the sale of property with one or more existing residential leases, clarifying if the leases will be terminated before closing or if the buyer will be assuming responsibility for the existing leases.
Addendum Regarding Fixture Leases: This addendum lists fixtures that are currently leased on the property, such as solar panels, propane tanks, water softeners or security systems. It clarifies that all rights to leased fixtures are dependent upon the fixtures’ lease agreements and states whether the buyer is assuming the fixture lease or if the seller will remove the fixtures prior to closing.
Know Which Forms You’re Using Between Now and April 1
If you haven’t already, check with your broker on which forms you should be using between now and April 1. As our industry transitions to the new forms, you’ll want to pay even closer attention to your contracts than you normally do. Now is the time to be extra vigilant about the forms that are being used and that contract forms and addenda match.
Transaction management platforms, such as TransactionDesk and ZipForms, have committed to having these new contracts available in their systems before April 1.
Know the New TREC Contract Forms Inside and Out with the ABoR Academy
With big contract changes like these, we wouldn’t leave you hanging! Our ABoR Academy team has called in the experts: Avis Wukasch, broker and former TREC Chair and Kerri Lewis, real estate attorney and former TREC General Counsel. Avis and Kerri will be teaching a new ABoR On-Air class: New TREC Contract Forms Review (TREC #40248 | Provider #10375 | 3 CE hours).
With over 75 years of combined real estate industry expertise, Avis and Kerri will ensure that you’re prepared to take on TREC’s new and updated contract forms. They’ll dig into recent revisions to the promulgated forms — including an in-depth review of the updated One to Four Family Residential Contract and the new Residential Lease and Fixture Lease addenda — and provide best practices for completing and using the updated forms and highlight important changes that all agents and brokers need to know.
Our first New TREC Contract Forms Review class will be held on Monday, April 12 and you can register at ABoR.com/Calendar. While you’re there, you’ll notice that we’ve added all of our 2021 class offerings to the ABoR calendar so you can plan out the rest of your year. This includes the free 18 hours of CE license renewal included with your ABoR membership. Don’t forget, too, that you can get your free CE hours any time and at your own pace through our partnership with AceableAgent (ABoR.com/AceableAgent).