Beginning Feb. 1, 2023, the revisions made to the standard TREC contract will be mandatory for all agents using these forms. This includes the one- to four-family, condominium, and farm and ranch contracts.
These changes, which were approved in November of 2022, are part of TREC’s regular updates to their contract forms and reflect the input of agents and brokers across the state. While some of these changes are more clerical in nature, some are quite substantial and need to be taken into consideration by all agents moving forward.
Loan Disclosure Changes
The biggest change to the contract is a reflection of the crazy market of the past few years.
Paragraph 3A has been expanded to include an explicit definition of what is defined as the “Cash Portion of the Sales Price.” This is a reaction to buyers writing “all cash” contracts to win out in a multiple-offer situation when they really intended to get financing. Going forward, with this new form, a buyer who puts in an all-cash offer and then goes on to purchase the home with a loan has potentially put themselves in hot water.
Additionally, the Third Party Financing Addendum has been expanded to include a paragraph for “Other Financing.” This is where loans that do not fall into Paragraphs 1A through 1F would need to be disclosed. This includes (but is not limited to) loans from hard money lenders, from a buyer’s 401k, or from a buyer’s trust fund. Unlike Paragraphs 1A through 1F, Paragraph 1G requires that the name of the lending entity be disclosed.
Required Notices
In Paragraph 6E (Title Notices), an additional paragraph has been added to the TREC contract to specifically note if any MUD, PID, or WCID notices have been added to the contract. Due to the laws governing these entities, certain disclosure is required if the subject property is affected by one of these entities.
Special Provisions
In the past, many agents have taken creative license and have written in whatever agreements their clients want in the Special Provisions section of the contract. However, this has always been construed as “practicing law,” and if a problem arose regarding their home-cooked contract terms, the agent could find themselves in a sticky situation.
In order to help prevent this issue from arising, clarifying language has been added in the TREC contract that states that Special Provisions are for factual statements only and that brokers and agents are prohibited from practicing law.
Other Changes
- Escrow Agent has been defined and capitalized throughout the entire contract.
- Sellers must now provide buyers with copies of paid receipts for any repairs, and sellers must arrange and pay for any transferable warranties with respect to the repairs
- Private transfer fees (different than HOA transfer fees) are now specified to be the obligation of the seller unless otherwise provided for.
- The Amendment now directly references and incorporates the contract paragraph that governs repairs and has a note that agents cannot practice law.
- The HOA Addendum clarifies which items are not included as “Fees and Deposits for Reserves.”
- The Addendum Regarding Fixture Leases now has checkboxes to identify what kinds of fixture leases the buyer is assuming, and it now includes a blank for disclosure of oral Fixture Leases.
- The Addendum Regarding Residential Leases now includes a blank for disclosure of oral Residential Leases.
These changes were intended to rectify vague terms and prevent issues that had arisen with the previous contract. While that mission has been largely accomplished, there is no doubt that new issues will arise due to this new contract (which is available here on the TREC website), and more revisions will be released in the coming years.
