The Broker-Lawyer Committee (BLC) recommended several changes to the TREC contract forms. Most of these changes are the culmination of two years’ worth of work on the part of the committee, with other changes recommended in response to industry practice changes around broker compensation affecting many license holders. The following changes were proposed at the August TREC Meeting. 

You can provide public comment on proposed changes until October 6.

Recommended Proposals Related to Compensation Language

In light of recent industry changes surrounding broker compensation, Paragraph 12A(1)(a) and 12A(2) adds that each party pays the brokerage fees that they each have agreed to pay. Paragraph 12A(1)(b) is amended to allow for a specific seller contribution to the buyer’s brokerage fees.

A new Paragraph 12A(1)(c) has been added to separately address other seller contributions (that was previously in Paragraph 12A(1)(b)) and the prior language that specified the order in which any contribution was to be paid, as well as a limitation on the type of fee that could be paid, is removed. Conforming changes are also made in the Amendment to Contract.

The compensation disclosure in the Broker Information section of the contracts (except for the Farm and Ranch Contract) removes the parenthetical referencing the MLS and to add checkboxes to allow for the fee to be reflected either as a percentage or a dollar amount.

Recommended Proposals Related to the One to Four Family Residential Contract (Resale) Form

• Paragraph 4 is 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.
• To be consistent with a recently updated Texas Department of Insurance procedural rule, Paragraph 6C(1) is amended to include the option of providing the T-47.1 Declaration (which does not need to be notarized)—in lieu of the T-47 Affidavit—when the Seller furnishes the Buyer an existing survey. In lieu of providing a “no survey required” option, Paragraph 6C(2) is amended to read “Buyer may obtain a new survey” instead of “Buyer shall obtain a new survey”, and adds 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.
• 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) is 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. For consistency with that paragraph and with applicable statutory requirements, Paragraphs 6E(4), (7), and (9) are amended to remove references to a separate related addendum.
• Paragraph 8B is changed to add a statement that brokers’ fees are not set by law and are negotiable.
• The title of Paragraph 20 is changed to “Federal Requirements” from “Federal Tax Requirements.” In new Paragraph 20B of the Farm and Ranch Contract, information regarding the obligations related to the federal Agriculture Foreign Investment Disclosure Act has been added.

Review the redline draft of the One to Four Family Residential Contract (Resale).

Recommended Proposals Related to the Third Party Financing Addendum

In the Third Party Financing Addendum, to ensure the buyer is terminating appropriately, 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. The language in Paragraph 2B is modified because the language related to notice of termination timing was different than in other contract provisions and was causing confusing. “Requirements” in Paragraph 4 is made singular and a conforming change is made to a paragraph citation.

Review the redline draft of the Third Party Financing Addendum.

Recommended Proposals Related to the Condominium Resale Certificate

The Condominium Resale Certificate is amended to conform the language in Paragraphs K and L with section 82.157, Texas Property Code.

Review the redline draft of the Condominium Resale Certificate.

Recommended Proposals Related to the Unimproved Property Contract, Addendum for “Back-Up” Contract

In the Unimproved Property contract, Paragraph 3D is amended to include the same sales price adjustment language as in the Farm and Ranch contract. A dollar sign is also added to Paragraph 3D in the Farm and Ranch Contract.

Out of concern about confusion and improper use of Paragraph 11, Special Provisions, by license holders, the Addendum for “Back-Up” Contract is modified to provide more clarity on the timing and payment of the earnest money and option fee by incorporating similar language from Paragraph 5 of the contract and by addressing timing and payment of additional fees.

Review the redline draft of the Unimproved Property Contract.

Review the redline draft of the Addendum for "Back-Up" Contract.

Recommended New Addendum for Section 1031 Exchange Form

The committee drafted a new Addendum for Section 1031 Exchange form that allows the seller or buyer to disclose an intent to use the subject property as a 1031 exchange and includes a statement that the parties will reasonably cooperate with one another. Providing this as an addendum, rather than in the contract, allows the parties to use it when applicable without causing unnecessary confusion. A reference to the new Addendum for Section 1031 Exchange is also added to Paragraph 22 of the contract.

Review the draft Addendum for Section 1031 Exchange.

The BLC will review the public comments it receives to determine whether it should make changes to their proposals or recommend the Commission adopt the changes as proposed at the November TREC Meeting.