By Lydia Blair
March is a month for changes — in both the Texas weather and real estate contracts. Haven’t you heard? There are recent contract changes that became mandatory for use by agents on March 1, 2019.
Don’t worry. You’re not the last to learn about these changes. Seems like very few agents are aware of them. They aren’t life changing, but they’re important when it comes to terminating a contract, getting a mortgage or the appraisal.
The Texas Real Estate Commission (TREC) recently adopted these changes to the addendums that accompany real estate contracts. I think they’re a good thing because they help clarify issues and potential disputes.
Here is the short and simple version of these changes that are now mandatory if you’re using TREC contracts (which would be everyone I know):
Third Party Financing Addendum:
If you’re a buyer getting a mortgage, you’ll be seeing this addendum. Or if you’re a seller and your buyer is getting a mortgage, you’ll be signing this as well.
Paragraph B of this form requires the buyer to give the seller written notice at least three days before the closing date if they want to terminate due to lender requirements regarding the appraisal, insurability, or repairs. Previously, the buyer had up until closing to terminate due to these lender requirements.
The new form also requires the buyer to provide the seller with written evidence of the lender’s determination if they are terminating for this reason. Both of these changes seem fair and reasonable.
Notice of Buyer’s Termination of Contract:
No one likes to see this document. But at least this form is better defined. There are now eight different options to choose from when a buyer is terminating the contract.
- Box 3 is used in conjunction with the above-mentioned Third-Party Financing Addendum. It requires the buyer to deliver a written statement from their lender as to why the property does not meet lender approval.
- Box 6 is checked when the buyer elects to terminate due to the appraisal. It requires the buyer to deliver a copy of the appraisal to the seller. To use this box, both buyer and seller would have needed to sign the Appraisal Addendum with their contract.
- Box 7 is used when the buyer opts to terminate because timely objections were not cured by the end of the Cure Period in paragraph 6D of the contract. These pertain to survey issues and title commitment problems. Paragraph 6D of the contract explains the Cure Period and options available to both buyer and seller.
Seeing a deal die isn’t fun for buyer or seller. And certainly not for their agents or the title company. But these changes benefit all parties with transparency that is needed when a deal terminates.
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
Lydia Blair (formerly Lydia Player) was a successful Realtor for 10 years before jumping to the title side of the business in 2015. Prior to selling real estate, she bought, remodeled and sold homes (before house flipping was an expression). She’s been through the real estate closing process countless times as either a buyer, a seller, a Realtor, and an Escrow Officer. As an Escrow Officer for Carlisle Title, she likes solving problems and cutting through red tape. The most fun part of her job is handing people keys or a check.