The Texas Real Estate Commission (“TREC”) has adopted several form changes for the TREC contracts that will become effective January 3, 2025. The forms will be posted online with TREC soon. Once posted they are available for voluntary use.
The changes listed below apply to all contract forms unless specified otherwise. If paragraph numbers are referenced, they correlate to the One to Four Family Residential Contract (Resale) which is what we are focusing on in this article.
Paragraph 4 has been amended to add the term “geothermal” to the definition of Natural Resource Leases as a result of a 2023 law change that stipulates property owners own the geothermal energy below the surface of their land and can drill or produce that energy and associated resources.
Paragraph 6(C) has been updated to include the new optional T-47.1 declaration that can be used in lieu of the T-47 survey affidavit. This T-47.1 was also discussed in last month’s Closer’s Corner: T-47 Affidavit Changes and a New Friend (T-47.1) | Texas National Title.
Sometimes when there is a cash buyer, the buyer does not feel it is necessary to obtain a survey for the transaction and the committee had been asked to provide a “no survey required” option to cover that scenario in the contract. While not obtaining a survey for closing is inherently pretty risky (and you should call me to discuss if you think you have a client heading down that path), TREC did make some modifications in Paragraph 6(C) to address the situation. Paragraph 6C(2) has been amended to read as follows:
The language changes “shall” to “may” so that the buyer has an option to obtain a new survey, but it is not mandatory under the contract. Language has also been added to say that if the buyer ultimately fails to obtain the survey, the buyer does not have the right to terminate the contract under Paragraph 2B of the Third Party Financing Addendum because the survey was not obtained.
There have been a couple of modifications made to Paragraph 6(E) for the notices. The language “An addendum containing the notice promulgated by TREC or required by the parties must be used” has been removed in several places. Additionally, because Texas law requires a seller to provide a buyer a copy of any mold remediation certificate issued during the five years preceding the sale of the property, new Paragraph 6E(11) is added to provide information regarding this requirement (except in the Unimproved Property Contract). Paragraph 6E(12) has been modified to add specific examples of the types of notices that should be listed in the paragraph and to add a caution that Seller’s failure to provide required notices may provide Buyer with certain remedies, like the ability to terminate the contract.
Paragraph 20 changes the title to “Federal Requirements” from “Federal Tax Requirements.”
Paragraph 22 now provides for the Section 1031 Exchange addendum to be added to the check boxes listing addendums.
Compensation Related Changes
In light of recent discussions surrounding broker compensation there have been a couple of changes to the contract forms.
Additionally, the compensation disclosure in the Broker Information section of the contracts (with the exception of the Farm and Ranch Contract) has been modified to remove the reference to MLS. It also now provides for commission sharing to be reflected either as a percentage or a dollar amount.
Third Party Financing Addendum
Paragraph 2A, Buyer Approval, has been changed to require both a notice of termination and a copy of a written statement of the lender’s determination like in Paragraph 2B, Property Approval.
There are several other changes that have been made so we will be hosting training classes in December and January to go over the changes in more detail. Please contact me for additional details.
