Residential Real Estate Contracts Are Not Designed to Protect You

For the vast majority of people, their home is the single largest asset they possess at any given moment, and yet, the contract that governs the buying and selling of their prized asset, is a standard, one-size-fits all contract. This makes no sense.

The Texas Real Estate Commission creates and updates on an annual basis the One to Four Family Residential Contract - not with your particular needs in mind - but with an eye towards facilitating the deal. They are required to make a contract that is “in the public’s best interest” - not in your best interests.

Here Are Some Common Problems That Arise:

+ (1) Failure to be Region Specific

Different areas have different issues. TREC forms are a one-size fits all approach, updated on an annual basis, and are not dynamic enough to capture important, costly on-the-ground realities.

For instance: Irving, Texas has notorious foundation problems. What inspections should you order? Or what are you required to disclose?

The TREC document does not account for the different timelines that different inspections have.

+ (2) Difficult to Enforce Clauses.

A specific performance clause is included in the standard TREC document, but in reality, in the event of a Buyer Default, the Seller is likely only to recover an earnest money deposit. This is because even outside the option period, it is highly unlikely a judge will enforce a specific performance clause. So why is it there? Why shouldn’t the Seller demand a more robust Earnest Money Deposit in a tiered method instead?

+ (3) Failure to control for the “The True Out.”

Sellers incorrectly assume that once the transaction is outside the option period, they are in the “clear.” Unfortunately, the standard Third Party Financing addendum is drafted in such a way that allows the Buyer to recover the Earnest Money Deposit as long as the Bank does not approve them. If the Buyer is unhappy, the Buyer realtor will call up the bank, someone they will often have a personal relationship with, and will ask the banker to cancel the contract. The Seller should insist on placing clauses to prevent this sort of conduct.