The TREC 1-4 Family Residential Contract (Resale) is the standard contract used in Texas when purchasing a resale home that has one to four units (not new construction, condos, or commercial). Understanding each section is crucial because it outlines the rights and responsibilities of both buyers and sellers. Here’s a breakdown of the key sections and their importance:

1. Parties

• Importance: Identifies the buyer(s) and seller(s). Correct legal names are essential to ensure the contract is binding.

2. Property

• Importance: Describes the property being sold, including address, legal description, and any included items (like appliances). Accuracy avoids disputes over what is being conveyed. Pay attention to Letter D under this section. This section allows the seller to specify items that they want to keep and not convey with the property, even though they might typically be considered part of the home or real estate.

3. Sales Price

• Importance: Breaks down the total price, including cash down payment and financing. Ensures clarity on what is being paid and how.

4. Leases

Discloses if the property is leased (residential, fixture, or mineral). Important for buyer’s use and investment planning

5. Earnest Money and Option Fee

• Importance:
  • Earnest Money: Shows buyer’s commitment. Shows good faith; refundable under certain conditions.
  • Option Fee: Grants the buyer the right to terminate during the option period for any reason. Pays for the right to terminate; not refunded, even if the buyer backs out
  • Timelines and delivery are key—missing them can void protections.

6. Title Policy and Survey

• Importance: Covers who pays for title insurance, who provides a survey, and timeframes. Ensures clear ownership and property boundaries. In a Texas real estate transaction, the seller typically pays for the title policy, but this is completely negotiable and can vary depending market conditions. If it’s a seller’s market, the buyer might offer to pay for the title policy to make their offer stronger. In buyer’s markets, sellers often still cover it to stay competitive. When Can a Seller Use an Old (Existing) Survey? Under Paragraph 6C(1) of the TREC 1-4 Family Residential Contract, the seller can provide their existing survey, IF they also provide a signed T-47 Residential Real Property Affidavit. It’s a sworn statement from the seller that: The survey is accurate and No changes (like added structures, fences, pools, sheds, etc.) have been made to the property that would affect boundary lines. If there have been changes, or the seller isn’t sure, the buyer may need to order a new survey. The T-47 affidavit is completed signed and notarized, title company and buyer’s lender accept it, and the existing survey is legible and clearly shows the property boundaries. If any of those three don’t agree to accept the old survey, then a new one must be ordered.

7. Property Condition

• Importance: Addresses disclosures, inspections, and repair agreements. Protects the buyer’s right to investigate and negotiate repairs.

8. Brokers’ Fees

• Importance: States that commission is paid according to separate agreements. Keeps brokerage issues out of the buyer-seller deal.

9. Closing

• Importance: Specifies the closing date, possession terms, and who pays for what. Sets expectations for when the home officially changes hands. In a Texas real estate transaction, the buyer typically chooses the title company, but — just like many things in the contract — it’s negotiable. Here’s how it works in practice: TREC 1-4 Contract, Paragraph 6A states that the seller furnishes the title policy, but the contract also includes a blank space to name the title company. Usually, the buyer’s agent fills that in when submitting the offer, so the buyer essentially picks the title company. The seller can accept, counter, or propose a different title company in negotiations.

10. Possession

• Importance: States whether the buyer gets possession at closing/funding or another time. Avoids disputes over move-in/move-out timing. Includes info on smart devices (e.g., passwords must be transferred)

11. Special Provisions

• Importance: For factual business terms only (not legal clauses). Misuse can create legal problems—should not be used for repairs, contingencies, or financing terms. Agents CANNOT practice law. They can’t add legal clauses or modify the intent of the contract. Paragraph 11 is not for writing contingencies or “subject to” language. Examples of Acceptable Special Provisions: “Buyer may park moving truck in driveway for up to 24 hours after closing.”“Seller will leave pool maintenance records and instruction manuals on kitchen counter.”“Property to be professionally cleaned by [date] at Seller’s expense.”“Seller will remove above-ground pool prior to closing.”“Buyer to have permission to enter property for measurements with 24-hour notice.” Unacceptable Examples (require addenda or legal review): “This contract is contingent upon the sale of Buyer’s current home.” ← Use the Sale of Other Property Addendum; “If the appraisal comes in low, seller agrees to lower the price.” ← Use Appraisal Addendum; “Seller will repair roof before closing.” ← Should be in an Amendment or Repair Agreement; “Buyer has right to terminate if financing is not approved.” ← Already covered in the Third-Party Financing Addendum

12–13. Settlement and Prorations / Taxes

• Importance: Clarifies how costs like property taxes, HOA dues, and rents will be split based on closing date. Ensures financial fairness between buyer and seller.

14. Casualty Loss

• Importance: Addresses what happens if the property is damaged before closing. Protects both parties from unexpected loss.

15. Default

• Importance: Outlines what happens if either party breaches the contract. Includes remedies like retaining earnest money or suing for performance.

16. Mediation

• Importance: Encourages mediation before litigation. Can save time and money in case of disputes.

17. Attorney’s Fees

• Importance: States that the winning party in a lawsuit can recover attorney’s fees. Encourages fair dealing.

18. Escrow

• Importance: Explains how earnest money is handled and returned. Protects the buyer and seller by involving a neutral third party.

19. Representations

• Importance: Reaffirms that statements made are true. Misrepresentation can lead to contract termination or legal action.

20. Federal Tax Requirements

• Importance: Ensures compliance with IRS rules (like FIRPTA for foreign sellers).

21. Notices

• Importance: Lists contact info for all communications. Ensures proper delivery of key documents and notices.

22. Agreement of Parties (Addenda)

• Importance: References any addenda attached (e.g., financing, HOA, lead-based paint). All addenda become part of the contract.

23. Termination Option

• Importance: Specifies the option period during which the buyer can terminate for any reason. Critical for inspection and negotiation window. The Termination Option, found in Paragraph 5 of the TREC 1-4 Family Residential Contract, is one of the most powerful protections for a buyer in a Texas real estate transaction. Let’s break it down in plain English: It gives the buyer the unrestricted right to terminate the contract for any reason within a specific time frame — known as the Option Period — in exchange for a fee paid to the seller (called the Option Fee). This period is often used by the buyer to: Do inspections, Get contractor bids, Renegotiate based on findings, Back out if the home isn’t right — without needing a specific reason. It’s like a paid “grace period” to do your homework. Option Fee: Pays for the right to terminate; not refunded, even if the buyer backs out. Document all termination notices in writing, before the 5:00 PM deadline
  

24. Consult an Attorney

• Importance: Reminder that TREC and agents can’t give legal advice. Encourages parties to seek legal counsel if needed.