TREC Contract Forms Flashcards

What happens to the earnest money if a buyer defaults under a TREC contract?

Answer: It may be retained by the seller as liquidated damages

If the buyer defaults, the seller may be entitled to retain the earnest money as liquidated damages under the terms of the contract.

The TREC Addendum for Back-Up Contract is used when:

Answer: A secondary offer is accepted contingent on the failure of a prior contract

The Back-Up Contract Addendum establishes a secondary contract that becomes primary only if the existing contract terminates.

Under TREC promulgated forms, who typically pays the title policy premium in a Texas residential resale transaction?

Answer: The seller pays by default, but it is negotiable

In Texas, it is customary for the seller to pay for the owner's title insurance policy, though this is negotiable in the contract.

What must a licensee do if a TREC promulgated form does not contain a provision needed for a transaction?

Answer: Use a Special Provisions paragraph or attach an attorney-drafted addendum

Licensees may use the Special Provisions paragraph for factual statements or attach an attorney-drafted addendum for additional terms.

The TREC Farm and Ranch Contract is used for:

Answer: Properties used for agricultural purposes, including farm/ranch land

The Farm and Ranch Contract is a TREC promulgated form designed specifically for agricultural properties and ranch land transactions.

If a buyer exercises the option period termination right, who receives the option fee?

Answer: The seller retains it regardless of outcome

The option fee is non-refundable and is retained by the seller when the buyer terminates during the option period.