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Contracts & Forms

TREC requires that license holders use promulgated contract forms in most residential transactions. Understanding each form — and when to use it — is foundational to protecting your clients and your license.

Texas Promulgated Forms Option Periods Repair Negotiations Earnest Money Multiple Offer Situations Backup Contracts Termination Procedures Financing Contingencies

Texas Promulgated Forms

TREC requires that license holders use promulgated contract forms in most residential transactions. Understanding each form — and when to use it — is foundational to protecting your clients and your license.

One to Four Family Residential Contract

The most commonly used form in Texas residential transactions. It governs the sale of single-family homes, duplexes, triplexes, and fourplexes. Key sections include purchase price, financing terms, earnest money, title policy, survey, option period, and closing date.

Tip: Always confirm the property type before selecting the correct promulgated form. Using the wrong form creates contract validity issues.

New Home Contracts

TREC provides two new home contracts: one for incomplete construction and one for completed construction. Builders often use their own contracts — agents must review these carefully and advise buyers that builder contracts are typically more favorable to the builder.

Tip: When a builder insists on using their own contract, advise your buyer to have a Texas real estate attorney review it before signing.
What addenda are most commonly used in Texas transactions?
The most frequently used TREC addenda include: Third Party Financing Addendum — required when the buyer is obtaining a mortgage. Specifies loan type, amount, and financing contingency terms. Addendum for Sale of Other Property by Buyer — used when the buyer's purchase is contingent on selling their current home. Addendum for Property Subject to Mandatory HOA Membership — required for properties in HOAs. Seller's Temporary Residential Lease — used when the seller needs to remain in the property after closing. Buyer's Temporary Residential Lease — used when the buyer takes possession before closing. Short Sale Addendum — required when the sale is subject to lender approval of a short payoff.
When must I use a TREC promulgated form vs. a Texas REALTORS® form?
TREC promulgated forms are mandatory for license holders in most standard residential transactions. Texas REALTORS® forms are available for situations not covered by TREC forms — such as commercial transactions, farm and ranch, or specialized residential situations. Texas REALTORS® forms are approved for use but are not TREC-promulgated. Using a non-promulgated form when a promulgated form exists is a TREC violation. When in doubt, use the TREC form or consult your broker.

Option Periods

The option period is one of the most misunderstood — and most important — provisions in a Texas residential contract.

How the Option Period Works

The option period gives the buyer an unrestricted right to terminate the contract for any reason by paying an option fee to the seller. The fee amount and period length are negotiable. The buyer must deliver the option fee to the seller — not the title company — within 3 days of the effective date.

Tip: Confirm delivery of the option fee directly. A missed or late option fee delivery means the buyer has no option period — even if both parties intended one.

Extending the Option Period

If additional time is needed for inspections or due diligence, the parties can extend the option period by executing an Amendment to Contract. The extension requires agreement from both parties and typically involves an additional option fee payment to the seller.

Tip: An oral agreement to extend the option period is not enforceable. Always get extensions in writing using the TREC Amendment form before the original option period expires.

  1. Negotiate option fee and period length

    Typical Texas option periods range from 5 to 10 days. Option fees range from $100 to several hundred dollars depending on the market and price point.

  2. Deliver option fee to seller within 3 days

    The option fee must be delivered to the seller (or seller's agent with written authorization) within 3 days of the effective date of the contract.

  3. Conduct inspections during the option period

    Schedule all inspections — general, foundation, roof, HVAC, pool, etc. — as early as possible to allow time for review and negotiation.

  4. Decide to proceed, negotiate, or terminate

    Before the option period expires, the buyer must decide: proceed as-is, request repairs/concessions via Amendment, or terminate using the TREC Notice of Buyer's Termination of Contract.

Repair Negotiations

How you handle repair negotiations after the inspection can make or break a deal — and expose you to liability if not handled correctly.

Repair Requests vs. Price Reductions

Buyers can request repairs, a price reduction, or a seller concession toward closing costs. Each approach has pros and cons. Repairs completed by the seller carry risk if not done properly. Price reductions and concessions give the buyer control over how the money is used.

Tip: From a risk-reduction standpoint, seller concessions or price reductions are often cleaner than repair requests — they eliminate disputes over workmanship quality.

Using the TREC Amendment Form

All repair agreements must be documented using the TREC Amendment to Contract form. The amendment should clearly specify: what is being repaired, who is responsible, the dollar amount (if a concession), and the deadline for completion.

Tip: Never document repair agreements via text message or email alone. Always execute a formal TREC Amendment. Undocumented agreements are unenforceable.
Suggested Script — Presenting Repair Request to Listing Agent

"We've completed our inspection and the buyer would like to address a few items. Rather than a list of repairs, we'd like to request a seller concession of $[X] toward the buyer's closing costs. This keeps things clean and avoids any disputes about workmanship. Can we discuss what works for your seller?"

Earnest Money

Earnest money disputes are among the most common issues agents face. Understanding the rules prevents costly mistakes.

Delivery & Deposit Requirements

Earnest money must be delivered to the escrow agent (typically the title company) within 3 days of the effective date of the contract. The title company holds the funds in trust until closing or termination.

Tip: Confirm earnest money receipt with the title company in writing. Keep documentation of delivery in your transaction file.

Release of Earnest Money

When a transaction terminates, both parties must sign a Release of Earnest Money form. If there is a dispute, the title company cannot release funds without written agreement from both parties or a court order. Agents should never advise clients on who is "entitled" to earnest money — that is a legal determination.

Tip: If a client asks whether they are entitled to the earnest money, direct them to consult a Texas real estate attorney. Making this determination yourself creates liability exposure.

Multiple Offer Situations

Texas law and NAR ethics require careful handling of multiple offers to protect all parties and avoid discrimination claims.

What are the seller's options when multiple offers are received?
The seller has three options: (1) accept one offer outright, (2) counter one offer while leaving others pending, or (3) notify all buyers of the multiple offer situation and invite them to submit their highest and best offer by a deadline. The listing agent must follow the seller's instructions and disclose the existence of multiple offers to all buyers (but not the terms of competing offers).
Can I disclose the terms of competing offers?
No. Disclosing the specific terms of a competing offer without the offering buyer's consent is an ethics violation under NAR Code of Ethics Standard of Practice 1-15. You may disclose that multiple offers exist and that the seller is asking for highest and best. You may not disclose the price or terms of any competing offer. Disclosing competing offer terms without consent is an ethics violation and can result in a TREC complaint. Always protect the confidentiality of all offers.
What is an escalation clause and how does it work in Texas?
An escalation clause states that the buyer will beat any bona fide competing offer by a specified increment, up to a maximum price. While not prohibited in Texas, escalation clauses create complexity. The listing agent must provide a copy of the competing offer that triggered the escalation (with the competing buyer's personal information redacted). Sellers and listing agents should carefully review escalation clauses before accepting them.

Backup Contracts

Backup contracts are a legitimate and often overlooked strategy in competitive Texas markets.

How Backup Contracts Work in Texas

A backup contract is a binding contract that becomes the primary contract if the first contract terminates. The TREC Addendum for Back-Up Contract must be used. The backup buyer's earnest money is held by the title company and their option period does not begin until they receive written notice that they have moved into the primary position.

Tip: The backup buyer cannot terminate simply because they are tired of waiting — they must wait until they move to primary position or their contract expires. Agents should advise backup buyers to continue their home search while under a backup contract.
Tip: Always use the TREC Addendum for Back-Up Contract. Document the date the backup buyer receives notice of moving to primary position, as this starts their option period clock.

Termination Procedures

Knowing how and when a contract can be properly terminated protects your clients and prevents disputes.

Termination During Option Period

During the option period, the buyer may terminate for any reason using the TREC Notice of Buyer's Termination of Contract. The notice must be delivered before the option period expires. The buyer forfeits the option fee but is entitled to return of the earnest money.

Termination After Option Period

After the option period, termination rights are limited to specific contract provisions — financing contingency failure, title issues, survey objections, or seller default. Terminating without a contractual basis may result in the buyer forfeiting their earnest money and potential legal liability.

Tip: If a buyer wants to terminate after the option period without a clear contractual basis, escalate to the broker and recommend legal counsel before taking any action.
Suggested Script — Advising a Buyer on Termination Risk

"I want to make sure you understand the risk here. Your option period has expired, so terminating the contract at this point could mean losing your earnest money. Before we take any action, I want to loop in our broker and recommend you speak with a real estate attorney to understand your options. Can we set up a call today?"

Financing Contingencies

The Third Party Financing Addendum is one of the most important — and most misunderstood — documents in a Texas transaction.

How the Financing Contingency Works

The Third Party Financing Addendum gives the buyer the right to terminate and receive their earnest money back if they cannot obtain financing approval by the financing approval deadline. The buyer must make diligent, good-faith efforts to obtain financing and must notify the seller in writing if they cannot obtain approval.

Tip: If the buyer fails to notify the seller by the deadline, the financing contingency is waived and the buyer may lose their earnest money if they cannot close.
Tip: Track the financing approval deadline carefully. Set calendar reminders 3 days before the deadline to check with the lender on approval status.

The financing contingency protects the buyer — not the seller. If the buyer's lender denies the loan after the financing deadline has passed, the buyer may not be entitled to their earnest money back. Always advise buyers to work with a reputable lender and stay in close communication throughout the process.

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Option Period

My buyer forgot to deliver the option fee within 3 days. Do they still have an option period?

Texas Broker AI — Instant response

Unfortunately, no — if the option fee was not delivered to the seller (or the seller's agent with written authorization) within 3 calendar days of the effective date, the buyer does not have a valid option period, even if both parties intended one.

Here's what I'd recommend right now:

  1. Do not panic or make any verbal representations to the seller about the option period status.
  2. Escalate to your broker immediately — this is a situation that requires broker oversight.
  3. If the buyer still wants an inspection period, you can attempt to negotiate an amendment with the seller to add an option period retroactively, but the seller has no obligation to agree.
  4. If the seller agrees, execute a written Amendment to Contract before any inspections are conducted.

From a risk-management standpoint, document everything in writing and make sure your buyer understands they are currently proceeding without termination rights. This is a situation where your broker should be looped in before you take any further action.

General brokerage guidance — not legal advice. Consult a licensed Texas real estate attorney for legal matters.

  • Multiple OffersI have 4 offers on my listing. Can I tell each buyer what the other offers are to get them to go higher?
  • Earnest MoneyThe deal fell through after the option period. The seller is refusing to sign the release of earnest money. What do I do?
  • Financing ContingencyMy buyer's loan was denied 2 days after the financing approval deadline passed. Can they still get their earnest money back?

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