Texas TREC Contract

9 Replies

Hi all,

I ran across this blog post by a texas lawyer: http://drewshirley.com/a-lawyers-guide-to-the-trec...

Anyone disagree with the points this lawyer makes? In particular the following: 

Section 15: If you are the Buyer in a TREC form contract, do not, repeat, do NOT sign the contract unless you have crossed out the specific performance remedy for Seller. Specificially, you should cross out a portion of the first sentence of section 15 and replace it with some other language, so that it reads: “If Buyer fails to comply with this contract, Buyer will be in default, and Seller may (a) enforce specific performance, seek such other relief as may be provided by law, or both, or (b), as Seller’s sole and exclusive remedy, terminate this contract and receive the earnest money as liquidated damages, thereby releasing both parties from this contract.” This is the most important change in the contract, and I would not sign this contract unless this change is made. A deal breaker. If you, the Buyer, defaults, then the Seller can keep the earnest money and find a new buyer. He doesn’t get to force us to buy a house we don’t want or can’t afford. Period.

True, for the most part.   I wouldn't say it's a deal killer but I certainly like to limit my exposure.  It's a case by case basis, but there are also many other revisions to the contract that I make to also help limit my liability...this is just one of them. 

Guy Gimenez, Buying Texas Today | [email protected] | (512) 270‑7279 | http://www.BuyingTexasToday.com

I don't know.....IMO, being able to get out of the deal at low cost is what your option period is for.

I would agree with Lawyer.

Originally posted by @Tony Hernandez :

Hi all,

I ran across this blog post by a texas lawyer: http://drewshirley.com/a-lawyers-guide-to-the-trec...

Anyone disagree with the points this lawyer makes? In particular the following: 

Section 15: If you are the Buyer in a TREC form contract, do not, repeat, do NOT sign the contract unless you have crossed out the specific performance remedy for Seller. Specificially, you should cross out a portion of the first sentence of section 15 and replace it with some other language, so that it reads: “If Buyer fails to comply with this contract, Buyer will be in default, and Seller may (a) enforce specific performance, seek such other relief as may be provided by law, or both, or (b), as Seller’s sole and exclusive remedy, terminate this contract and receive the earnest money as liquidated damages, thereby releasing both parties from this contract.” This is the most important change in the contract, and I would not sign this contract unless this change is made. A deal breaker. If you, the Buyer, defaults, then the Seller can keep the earnest money and find a new buyer. He doesn’t get to force us to buy a house we don’t want or can’t afford. Period.

 Realtors (even the Buyer's agent) are going to disagree vehemently with it because it means that it's easier for the buyer to back out if anything goes wrong. No deal, no commission, which equals unhappy realtor. Specific performance can be a huge PITA to litigate on either side. If you're the buyer, do you really want a seller to be able to get a court order that orders you to buy the house, even if the Seller hid a big issue, but your objection deadlines are past? Do you want to be thrown in jail for contempt if you don't comply with that order? 

Remember, Buyer's agents have a vested interest in (a) the deal closing, and (b) the deal closing at the highest price possible. There's a HUGE conflict of interest there; it always amazes me how many buyers don't realize that.

@James Miller

Being a lawyer I am sure you would agree that whether this clause is in the contract or not it in no way would preclude a seller from suing.  Additionally, We both know that a specific performance suit in Texas is so rare that the whole paragraph is more informational than anything by the term "may".  I have had my license for 25+ years and have never even heard of a suit on the residential side.  Besides most of Texas is so hot right now no seller would want their property tied up in litigation anyway.   

Originally posted by @Greg H. :

@James Miller

Being a lawyer I am sure you would agree that whether this clause is in the contract or not it in no way would preclude a seller from suing.  Additionally, We both know that a specific performance suit in Texas is so rare that the whole paragraph is more informational than anything by the term "may".  I have had my license for 25+ years and have never even heard of a suit on the residential side.  Besides most of Texas is so hot right now no seller would want their property tied up in litigation anyway.   

I'll agree that specific performance suits are rare. But it's not so rare that it shouldn't be a concern. I've seen several pre-suit disputes over the the specific performance clause during my time practicing and read about more. The 'threat' of the specific performance clause in reality is used to get the seller a better cash settlement than they would get without it as opposed to actually getting a court order for the specific performance. 

From another angle, if it 'never' happened, then why have the clause in the contract in the first place? Sure, striking it doesn't preclude anyone for suing. But it's one thing to be sued for a money amount only. And it's another thing to be sued to be forced to buy a house you don't want. I've found buyer's agents are the ones most opposed to striking that clause, not sellers, and they usually argue with me until I remind them that they aren't allowed to give legal advice per TREC (edit:) and TRELA. 

Originally posted by @Guy Gimenez :

True, for the most part.   I wouldn't say it's a deal killer but I certainly like to limit my exposure.  It's a case by case basis, but there are also many other revisions to the contract that I make to also help limit my liability...this is just one of them. 

 Do you mind sharing what other revisions you make that help protect you as the buyer? Just curious.