Promulgated Contracts, Forms, and Addenda

Texas law requires licensees to provide a copy of the IABS form to both the lessor and lessee when

negotiating any residential lease that is for one year or more.

A buyer agency agreement is

A binding, written contract entered into by a prospective buyer and the buyer's agent. These include the scope of the buyer agent's responsibility and how compensation may be earned.

To insure compliance, the broker should post a link on the business's website homepage in a readily noticeable place and in at least 10-point font.

A completely filled out TREC IABS form labeled "Texas Real Estate Commission Information About Brokerage Service."

Sales Contract

A detailed sales agreement between the seller and buyer of a piece of real estate. In the sales contract, the terms and conditions of the sale, as well as the legal rights and obligations of both parties, are established.

Specific performance of a contract

A lawsuit to force the other party to perform exactly what was agreed to under the contract terms.

The TAR Residential Buyer/Tenant Representation Agreement has specific

beginning and ending dates, with the agreement automatically ending at 11:59 p.m. on the final day.

The Residential Condominium Contract is for

Condominiums only and can't be used for townhomes, which is one reason why it's important to be able to distinguish the difference between townhomes and condominiums.

What type of ownership to Townhome owners have?

Fee Simple Title to the land beneath their units

What is the Protection Period?

If a broker helps a client identify a potential property, and then just after the agreement terminates the buyer purchases the property directly from the seller or through another broker, the first broker is still owed a commission.

What type of property is taxed at a much lower rate?

Property that has been granted an agricultural exemption

As part of the Residential Condominium Contract (Resale), sellers are required to

Provide a copy of the Condominium Resale Certificate to buyers.

TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract has a specified

Start and end date. The listing agreement automatically terminates at 11:59 p.m. on the final day.

Novation

Substitutes the original party in the contract with a new party. This fully releases the original party from all liability for performance of the contract.

A Texas broker is owed a fee when

The broker has found a property the buyer wants, and the buyer has closed on it.

TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract must state

The property's legal description, including the lot, block, and street address, as well as its city and county in Texas.

The One to Four Family Residential Contract (Resale)—the most commonly used sales contract in Texas—is used for

The resale of existing homes and is also referred to as the residential resale contract.

Under the TAR Residential Real Estate Listing Agreement Exclusive Right to Sell contract, if the seller breaches the terms of the agreement,

The seller is in default and must pay the broker's fee as specified in the agreement. If the broker's fee was a percentage of the sales price and there was no sale, then the listing price will be used to calculate the fee.

The Unimproved Property Contract

Used for the sale of properties with no existing structures.

Substantial performance of a contract

When one party has met most but not all of the terms specified in the contract, and may be required to pay damages for the terms not met. This can also refer to sellers who do not fully complete agreed-upon repairs, but the buyer agrees to accept the property and fulfill to transaction.

Impossibility of performance

When the property is destroyed or made the subject of eminent domain. The parties cannot legally or practically do what they've agreed to do, so they are released from their obligations under the contract.

A net listing commission is

an indeterminate amount based on the difference between the net listing price and the sales price.

All listing agreements belong to

the broker

Paragraph 7 of the TREC residential resale contract

"Property Condition": addresses the buyer's access to the property for inspections.

When negotiating real estate transactions, licensees must prepare forms using only

1) TREC-approved and promulgated forms OR 2) Those otherwise permitted by TREC's rules, such as forms created by the Texas Association of REALTORS® (TAR)

Assignment of a contract

To transfer one of the original party's rights under the contract to a new party.

By signing the Showing Service Information form,

Clients agree to allow you to use an automated service to schedule showings with and collect feedback from potential buyers.

According to the Objections paragraph of the TREC residential resale contract, how long does the buyer have to object to title defects?

The buyer has until the earlier of either the closing date or the number of days specified in the Objections paragraph after receiving the commitment, exception documents, and survey.

The first paragraph of the One to Four Family Residential Contract (Resale) includes

The full legal names of the parties to the contract. The name of the seller(s) must match that on the deed or owner's title policy.

When a casualty loss occurs in a property prior to closing,

The seller must return the property to its previous condition as soon as possible before the closing date.

Contracts that are created by the broker-lawyer committee are promulgated by

TREC

Licensees may not add to or cross out items in approved contract forms unless

The licensee is adding any factual statements and business details that the parties ask licensees to add, or strike out only an item or items that the parties request licensees to strike out, as is necessary to conform the contract to reflect the parties' intent.

Partial performance of a contract

When a party does some, but not all, of what the party has agreed to do.

Which contract can be used for townhomes?

Only the One to Four Family Residential Contract (Resale)

In Texas, the statute of limitations is

4 Years

T-47 affidavit—also known as the Residential Real Property Affidavit

A sworn statement by the seller specifying whether there were any changes to the property since the last property survey.

Open listing agreements

Unilateral agreements in which a seller may contract with many real estate licensees to locate a buyer. Only the licensee who brings in the buyer earns the commission.

Under the TAR Residential Buyer/Tenant Representation Agreement, if the buyer client breaches the buyer agency agreement,

the buyer is in default and must pay the broker's fee as specified in the agreement. If the broker is in default, the buyer client may pursue any legal remedy available.

When TREC has not promulgated a standard contract form for the type of transaction the licensee is doing, there are 3 options:

1) Use a form that's been drafted and approved by a Texas attorney for that type of transaction (licensees should check with their broker for which forms the brokerage uses). 2) Use a form prepared by the broker-lawyer committee and made available with TREC's consent for trial use by licensees. 3) Use one of the many forms prepared by TAR, such as the Residential Real Estate Listing Agreement.

What if repairs can't be made by the closing date when a casualty loss occurs in a property prior to closing?

The buyer can 1) terminate the contract, 2) allow the seller more time and extend the closing date, or 3) accept the property in its damaged condition, with assignment of insurance proceeds from the seller if permitted by the insurance carrier.

There's no standard net listing addendum in Texas, so if you're going to use a net listing, you'll need to

have an attorney draft a special addendum or use one that's provided by your brokerage (and has been through an attorney review).

Which disclosure notice is included in the New Home Contract (Incomplete Construction)?

Chapter 27 of the Texas Property Code

In Texas, all real estate transaction records must be maintained by the broker for how long?

At least 4 years from the date of the transaction

The Keybox Authorization by Tenant

Authorizes the listing agent to place a lockbox and key on the property.

Seller's Authorization to Release and Advertise Certain Information form

Authorizes you to inform prospective buyers and other brokers about the information your clients have shared with you about why they are selling the property.

Paragraph 6A of the TREC residential resale contract

Has blanks for the name of the title company and checkboxes to indicate whether the title policy will be furnished at the seller's or the buyer's expense.

The Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum

Specifies which assessments the buyer wants performed and indicates how much time the buyer has to terminate the contract if the results are unfavorable.

A sales contract—also known as

a purchase contract, a purchase agreement, or an offer to purchase

In Chapter 27, after notifying the contractor of the defect and if requested by the contractor,

buyers must allow the contractor to inspect and cure the defect.

In Texas, a buyer agency agreement is automatically terminated by

the expiration of the term of the agreement. The parties can agree in writing to extend the agreement, however, or form a new buyer agency agreement. (Automatic renewal provisions for buyer agency agreements are illegal in Texas.)

Net listings can be written for

1) exclusive right to sell, 2) exclusive agency, or 3) open listing agreements

In Texas, the remedies for breach of contract include the following:

1) Accept partial performance 2) Rescind the contract unilaterally 3) Sue for damages 4) Sue for specific performance 5) Accept liquidated damages (which means that if a buyer breaches the contract, the buyer's earnest money serves as the seller's liquidated damages) 6) Mutually rescind the contract

The New Home Contract (Completed Construction):

1) Must be used for new construction properties that are finished. 2) Doesn't contain improvements, accessories, or exclusions. 3) Provides that the seller of a new home is responsible for the rollback taxes (due to change of use) because the seller is the party who changed the use of the land from agricultural to residential.

Under the TREC Farm and Ranch Contract, the property's sales price can be adjusted a maximum of

10% after the effective date of the contract, based on the survey's results. If the sales price is adjusted by more than 10%, either party may terminate the contract within the period of time specified on the contract.

Condo buyers are responsible for

The transfer fees charged by the association up to the amount specified in the contract, and the sellers are responsible for the excess amount.

Performance of a sales contract

The two parties have met their terms under the contract.

When crops are excluded from the sale of a farm or a ranch,

They must be removed before closing.

A Texas real estate sales contract can be terminated in any of the following ways:

1) The buyers exercise their rights under the termination option in the sales contract within a certain time frame 2) If either party defaults 3) If neither party agrees to pay for lender-required repairs or treatments to the property or lender-required repairs exceeding 5% of the sales price 4) Due to destruction of the property

License holders are required to use contract forms prepared by the Texas Real Estate Broker-Lawyer Committee and approved by TREC, unless

1) The form is prepared by a property owner, 2) government agencies, or 3) by an attorney on behalf of a property owner.

All Texas buyer agency agreements must contain the following required elements:

1) The names and contact information for both the broker and the buyer 2) The type, amount, and other terms of compensation. 3) The beginning and ending dates of the agreement 4) The obligations of each party 5) Intermediary status options 6) Addenda and special provisions

The condominium resale certificate contains

1) association financials, 2) frequency and amount of assessments, 3) pending lawsuits, 4) information about the right of first refusal

In Texas, before a contract for the sale of real estate is considered binding and executory, three things must occur:

First, the buyer must make a written offer on the property. Second, the seller must accept the offer in writing. Third, the buyer must be notified of the seller's written acceptance of the offer.

TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract prohibits the seller from

Listing the property with another brokerage prior to the expiration of the listing contract. It also requires the seller to allow the listing agent to show the property to potential buyers.

If a seller needs additional time past the closing date (due to no fault of the seller's) in order to restore the property to its original state after a casualty loss occurs,

The seller can extend the time up to 15 days under the terms of the TREC residential resale contract.

Under the Texas Farm and Ranch Contract where crops are involved,

The seller has the right to harvest the crops up until the closing unless otherwise specified in writing. The seller may also reserve the right to harvest after closing, provided the buyers agree to this in writing.

What if a form may be required by law, but not promulgated by TREC?

There's often a TREC-approved form available for licensee use, but other legally required forms that contain the same elements may be used instead.

Net listings agreements

Agreements in which the seller specifies a price desired for the property and agrees to pay the broker a commission that's any amount received more than that price.

What does the TREC residential resale contract, the Environmental Matters paragraph, 7(g) do?

Alerts buyers that wetlands, toxic substances, or the presence of a threatened or endangered species may affect the buyer's intended use of the property.

Termination Option paragraph

Gives the buyer the unrestricted right to terminate the TREC residential resale contract.

Under TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract, the broker is liable for

Injury to persons or property as a result of broker negligence. However, the broker isn't responsible for any injury to a person or loss or damage of personal or real property as long as it wasn't caused by something the broker did or neglected to do.

TAR's Residential Real Estate Listing Agreement Exclusive Right to Sell contract gives brokers the authority to

Market the seller's property, procure a buyer, and negotiate the sale of the property. However, it is the seller who sets the listing price.

If the licensee has not already provided the Information About Brokerage Services (IABS) form—along with the disclosure regarding which party the licensee represents in the transaction—at the time an offer to purchase has been made,

The licensee must provide the form at the time the sales contract is provided.

Rollback taxes in the Unimproved Property Contract

The party who changes the use of the property (say, by building residential housing on the property, thereby changing its use from agricultural to residential) is responsible for the rollback taxes.

Paragraph 12 of the TREC One to Four Family Residential Contract (Resale) reads

"If any expense exceeds an amount expressly stated in this contract for such expense to be paid by a party, that party may terminate this contract unless the other party agrees to pay such excess."

A TREC-adopted listing contract between a real estate seller and a seller's agent must include the following provisions:

1) A provision informing the parties to the contract that real estate commissions are negotiable. 2) A provision explaining the availability of Texas coastal natural hazards information that's important to coastal residents, if that information is appropriate.

TREC has promulgated residential sales contract forms for the transaction types:

1) One to Four Family Residential Contract (Resale) 2) New Home Contract (Incomplete Construction) 3) New Home Contract (Completed Construction) 4) Residential Condominium Contract (Resale) 5) Farm and Ranch Contract 6) Unimproved Property Contract 7) Work files 8) Disclosures

Texas real estate sales contract must contain, at a minimum, the following information:

1) Parties to the transaction 2) Legal description of the property 3) Sales price (the price being offered) 4) Financing contingencies 5) Earnest money deposit amount 6) Title policy and survey requirements 7) Addenda (any marked addenda must be attached to the contract) 8) Requirements for property condition disclosures 9) Broker's fees/compensation 10) Special provisions 11) Closing date and closing instructions 12) Settlement expenses and prorations 13) Legal notices 14) Option for termination

The New Home Contract (Incomplete Construction):

1) Should be used for properties where construction has yet to be completed. 2) Doesn't include improvements, accessories, or exclusions in the property section because the home is unfinished, so these items don't apply. 3) Buyer should receive construction plans and other construction documents, specifications, access and inspections, cost adjustments, buyer's selections, and completion information in the Property Condition section and appended to this contract. 4) Is subject to Chapter 27 of the Texas Property Code.

Net listings are legal in Texas, but they're only allowed with the following caveats:

1) The broker is obligated under a listing contract to negotiate the best possible transaction for the client. 2) A broker may not take these listings unless the client requires one and the client appears to be familiar with current market values of real property. 3) The licensee must provide a broker price opinion (BPO)—or comparative market analysis (CMA)—on the property if that licensee is negotiating a listing, or if the licensee is personally making an offer to purchase the property. 4) The listing agreement for that property must assure the client of receiving at least the client's desired price and must limit the broker to a specified maximum commission. The seller's agent doesn't have to split the overage with the buyer's agent unless it exceeds the maximum commission.

TREC-promulgated forms do NOT have to be used in the following situations:

1) When a licensee acts as a party to the transaction, and not as an agent in the transaction. 2) When there is a transaction for which a federal government agency (HUD, for example) requires use of a different form. 3) When a contract form is prepared by a property owner or by an attorney on behalf of a property owner.

If the seller doesn't make the agreed-upon repairs in the TREC residential resale contract, the buyer can

1) compel the seller to do so, 2) take any remedy offered by default, or 3) extend the closing date up to five days to allow the seller to complete the repairs.

When a licensee helps a buyer client write an offer on a property, the licensee will get one or two checks from the client at that time:

1) earnest money 2) option money check (which must be written to the seller).

Pitfalls with purchasing unimproved land

1) greater risk involved with unimproved land loans, 2) interest rates are usually higher than they would be for property with improvements, and 3) a larger down payment is usually required.

Rather than the lot and block description that appears on the One to Four Family Residential Contract, the Residential Condominium Contract (Resale) references

1) the condominium unit number, 2) building name, and 3) address

How many days does the seller have to cure the objections in a TREC residential resale contract?

15 days

Re: Chapter 27, the Federal Trade Commission (FTC) requires that

Information about the insulation installed be supplied to buyers under the New Home Contract (Incomplete Construction), either in the insulation section of the contract or attached to it.

When leaving one brokerage to join another,

Licensees are not allowed to take their active listings with them without their broker's permission.

Information About Brokerage Services form

Licensees must provide this form to all prospective clients or customers upon the first substantial dialogue about a specific property. This form explains the consumer's agency relationship options. It does not create a relationship.

If the use of the agricultural exemption property changes to a non-agricultural use,

Rollback taxes are assessed and can be quite substantial. The assessment is usually the difference between what the property taxes were with the ag exemption, and what they would have been without it.

Chapter 27 of the Texas Property Code requires that buyers must

Send notice to the contractor by certified mail, return receipt requested, no later than 60 days before the buyers file suit to recover damages in a court of law or initiate arbitration. The notice must mention Chapter 27 and describe the construction defect.

The only entity that can promulgate contract forms

Texas Real Estate Commission (TREC)

The primary difference between the Farm and Ranch Contract and the One to Four Family Residential Contract (Resale) is that

The Farm and Ranch Contract uses the metes and bounds method, while the One to Four Family Residential Contract (Resale) uses lot and block.

In Texas, who usually pays for the title policy?

The Seller

When the buyer accepts a property "as is," this means

The buyer is accepting the property in its current condition with any and all defects and without a warranty. However, the buyer still has the right to have the property inspected and may also negotiate repairs or treatments, regardless of which box is checked in the property condition section.

What if the buyer fails to deliver the Notice of Buyer's Termination Contract to the seller prior to option period's expiration date?

The buyer is obligated to complete the transaction

Operation of law

The manner in which an individual acquires rights or liabilities automatically due to law, rather than through an agreement or act of their own. If an individual dies while in the process of completing a real estate sales transaction, the individual's estate is required by law to meet the terms of the contract.

The listing agreement identifies

The terms of the listing agent/seller agency relationship. It spells out the scope of the listing agent's responsibility and what the listing agent must do to earn compensation.

A net listing doesn't refer to a type of listing agreement, but rather to

how the broker's commission will be paid.

Broker obligations under the TAR Residential Buyer/Tenant Representation Agreement include

locating a property that meets the buyer's criteria within a specified market area within the term of the agreement.

Chapter 27 requires that any written contract subject to this chapter

must contain in the contract a disclosure notice regarding the above-outlined requirements of Chapter 27.

The condo resale certificate must have been prepared within

the previous three months.