As of April 1, 2021, there are some changes to the One to Four Family Texas Residential Contract. To begin, let’s be sure we are utilizing the correct terminology regarding the difference between “contract” and “amendment.”
A offer is submitted with an initial offer on a home. Once that offer is accepted it will become an executed contract. An addendum (think “things that are ADDed”) is submitted along with the contract. An addendum is used to add Third Party Financing protection, Non-Realty Items or Properties Subject to an HOA, etc. Once the contract is executed, NO changes can be made on these pages.
Before submitting the contract to Title, it is imperative that you check for an effective date. The effective date is the day the last party initials on any changes. An amendment is only for changes to the contract. This would only happen if information in a particular paragraph needs to be changed. Amendments will be reviewed more thoroughly at the end of this document.
Below I’ve listed and explained the changes being made to the One to Four Family Residential Contract. Be aware of these changes before moving forward with filling out a contract.
If the property being sold is subject to a lease of some kind then the appropriate box will be market. This includes residential leases involving tenants occupying the property, a fixture lease such as solar panels or water softener and the lease of natural resources located on the property.
Keep in mind if there is the existence of a lease then additional paperwork maybe required such as addendums. Also, the seller will need to provide a copy of the existing lease to the buyer as quickly as possible. This could be an out for the buyer, so time is of the essence.
The termination option period has relocated to paragraph 5 from paragraph 23 and is the biggest change to the contract.
The option fee and earnest fee will now be combined into one payment and paid to the title company. You’ll have 3 days after the effective date of the contract to get the check to Title and be in compliance. If the third day lands on a weekend or holiday, it will push to the next business day.
When title receives the check, they will receipt the option money from the check first, and then the balance will be earnest money. Be sure the check covers both of those fees outlined in the contract. If the check is short, the option will be paid and the earnest will be short. The risk with that is that the seller might have a problem with it and can terminate the contract.
The bottom line is failure to deliver the earnest money in its entirety can give the seller an out.
The title company will be able to release the termination option fee to the sellers once the payment is received and verified good funds. If the seller does not request the funds up front then it will sit at title and be paid at closing to the sellers.
This was the old paragraph 4. This is where you would disclose if you (the agent) are a principal in the transaction or are related to one of the principals in the transaction.
Another change is a definition added regarding clearly defining controls, smart devices, and codes pertaining to smart devices in today’s homes.
There are many gadgets that might come with a house these days. If a Smart Device is going to convey with the property then the seller must be made aware that all access to the devices must be terminated so that the buyer upon closing can create their own account with the device.
This is a particular hot topic with Ring Doorbells. The doorbell is useless to the buyer unless the seller removes the property from their account.
This has not changed. Just remember, use of factual statements only should be inserted here.
It is HIGHLY recommended that you consult your broker for guidance when language needs to be added. A principal in the transaction can add their own language or they can consult an attorney for the proper language.
It is vital as an agent you do not cross the line there by adding in verbiage that may be considered practicing law. This paragraph can get you into trouble quickly.
Ask the lender how much they need for closing costs. If you ask for too much, and the lender only uses a portion, you won’t get the remainder back.
The buyer has essentially marked the price up and now they are paying that much more into a mortgage payment.
Wording has been added here to clearly define what fees title has the authority to pay prior to disbursement of funds held in escrow.
Two additional forms have been added here to be included in a contract when applicable. The addendum regarding leases and addendum regarding fixtures are now options.
If there is a paragraph in the amendment that spells out what you are changing, USE IT. If not, go to “other modifications.”
If you are asking for repairs to be done as a buyer’s agent, that’s alright. As the seller’s agent, it’s not best practice. It would actually be better in that case to negotiate money. If you have to though, it will be explained under Box 2.
List the repairs numerically. If the repairs being negotiated don’t fit in the space allowed, you will write, “See Exhibit A” and put them on an addendum to the amendment.
This is the one you are allowed to do. It means the seller needs a few days after closing to vacate the house. (This should not exceed 90 days. Otherwise it should be written up as a normal lease.)
The landlord is now the buyer and the seller is now the tenant. Come up with the terms which terminates at midnight on the day listed.
This is a contingency plan. This happens when the buyer’s current home must be sold in order to pay for the new house.
This will be dated to only allow a certain number of days for the buyer to provide the money or else other potential buyers can make an offer and essentially win the contract.
This addendum is used often as it pertains to the need for a loan. There are many types of loans, so be sure you are checking the correct box.
You will note the number of days before all HOA information is provided. In addition, you will include how much the buyer is willing to pay toward a transfer fee.
This is the place to add accessories that are not attached such as a refrigerator or a pool table for example.
This pertains to a conventional loan only.
Waiver (Box 1): Regardless what the home appraises for, the buyer will pay the difference out of pocket.
Partial Waiver (Box 2): Buyer is willing to increase only some of what they pay toward the difference when the appraisal does not satisfy the lender’s requirements.
Additional Right to Terminate (Box 3): The buyer can’t pay the difference and it needs to appraise for the sales price. Be sure you consult with the lender to know how many days to ask for in this paragraph to ensure you have plenty of time to get the appraisal back.
A blank addendum can be used when a field in the contract needs more room.
Example could be multiple buyers and there is not enough room for all the buyers to be listed in paragraph one. You would state “See Exhibit A” in the buyer’s field in the contract and then on this addendum you would title it Exhibit “A” and list all buyers. Using this form for listing out repairs is also another typical use.
This is a lot of information and it may take time to process all of the changes, so please study the video and this companion document. It may take several viewings and an analysis of the written synopsis to truly comprehend everything. Study and learn at least one contract page per day