TREC 1-4 Family Residential Contract: A Complete Guide for Texas Real Estate

What Is the TREC 1-4 Contract?

The TREC 1-4 Family Residential Contract is the standard purchase agreement used in the vast majority of Texas residential real estate transactions. TREC — the Texas Real Estate Commission — promulgates this form, meaning Texas real estate agents are required to use it (with limited exceptions) when helping clients buy or sell a 1-to-4 family residential property.

If you're buying or selling a home in Texas, you'll almost certainly be signing this contract. Understanding what you're signing matters. The form runs about 8 pages, but every paragraph has legal significance — and misunderstanding even one section can cost you significantly.

This guide breaks down the key provisions, what to watch for, and what the most important deadlines actually mean.

Who Uses the TREC 1-4 Contract

Texas real estate license holders are required to use TREC-promulgated forms when acting as an agent in a transaction. The 1-4 family contract applies to:

• Single-family homes
• Duplexes, triplexes, and fourplexes
• Condominiums (though a separate TREC form exists for condos)
• Townhomes

Attorneys can draft custom contracts. Licensed real estate agents generally cannot — they must use TREC forms unless an attorney drafts or reviews an alternative. This is a common misconception, and violating it creates serious licensing and liability problems.

Key Sections of the TREC 1-4 Contract

The contract is organized into numbered paragraphs. Here are the sections that matter most in most transactions:

Paragraph 1: Parties

Names the buyer(s) and seller(s) exactly as they'll appear on the deed. This seems simple — it often isn't. Married couples, trusts, LLCs, and estate situations all have specific requirements for how names must appear. Get this wrong and title can't transfer cleanly.

Paragraph 2: Property

Describes the property being sold — legal description, address, and any personal property (non-fixtures) included in the sale. Carefully distinguish fixtures (attached to the property, transferred with it by default) from personal property (movable, included only if listed here). Disputes over appliances, curtain rods, and ceiling fans are surprisingly common.

Paragraph 3: Sales Price

Sets the total purchase price and how it's structured: cash, loan amount, assumption of existing lien, etc. The earnest money amount is also established here. Earnest money goes to an escrow agent — typically the title company — and is credited toward the purchase at closing.

Paragraph 4: License Holder Disclosure

Discloses whether the real estate agent is representing buyer, seller, or both (intermediary). This disclosure is required under Texas law and affects what obligations each agent has to their client.

Paragraph 5: Earnest Money

Specifies who holds the earnest money (escrow agent), the amount, and when it must be delivered. In Texas, earnest money must be delivered within 3 days of the contract being accepted. Missing this deadline — or having the check bounce — can technically void the contract.

Paragraph 6: Title Policy and Survey

Allocates costs for the title insurance policy and survey. Traditionally, the seller pays for the owner's title policy in Texas, though this is negotiable. The survey is critical — it establishes property boundaries and identifies encroachments or easements.

Paragraph 7: Property Condition

One of the most negotiated paragraphs. Sets out the inspection period, what the buyer can inspect, and — critically — what the seller has agreed to repair. The "Acceptance of Property Condition" waiver in 7D can be a trap for buyers who sign without understanding what they're waiving.

Paragraph 9: Closing

Sets the closing date. This date is often treated as a target, but it's legally significant. If either party can't close by the date specified and doesn't get an extension, the other party may have remedies including keeping earnest money (seller) or terminating (buyer, in some circumstances).

Paragraph 10: Possession

Determines when the buyer takes physical possession. In most Texas transactions, possession transfers at closing or funding. Leaseback arrangements — where seller stays beyond closing — are handled with separate TREC addenda.

Paragraph 18: Mediation

Requires disputes to go to mediation before either party can sue. This paragraph is rarely negotiated out but frequently ignored until a dispute actually arises.

The Option Period: How It Works

The option period is one of the most important (and often misunderstood) features of the TREC 1-4 contract. For a small, non-refundable fee (the "option fee"), the buyer gets the unrestricted right to terminate the contract for any reason during the option period.

"Unrestricted" means exactly that. The buyer doesn't need to give a reason. They don't need to find something wrong with the inspection. They can simply change their mind — and walk away, losing only the option fee (not the earnest money).

Option fees in Texas typically run $100–$500 for residential transactions, though in competitive markets buyers sometimes pay more to make their offer more attractive. The fee must be delivered to the seller — not the escrow agent — by 11:59 PM on the day the contract is executed. Missing this delivery invalidates the option period.

Practically, the option period is when buyers conduct inspections and negotiate repairs. Most buyers won't exercise the option to terminate — they'll work through the inspection findings. But having that right during the inspection period gives buyers significant leverage.

Common Pitfalls with the TREC 1-4 Contract

After you've seen enough transactions, certain mistakes appear over and over:

Not specifying what personal property is included. If a piece of property is a fixture, it transfers with the sale automatically unless excluded. Personal property (not attached) must be specifically listed. Disputes over refrigerators, backyard swing sets, and mounted TVs delay or kill closings regularly.

Missing the earnest money deadline. Three days is tight. Many buyers don't realize the clock starts when the contract is executed (both parties signed), not when they receive a copy.

Misreading the financing contingency. Paragraph 3 establishes that if the buyer can't obtain financing approval within the specified timeframe and properly terminates, they get their earnest money back. But failing to properly terminate — in writing, to the right parties, by the deadline — means the earnest money may be at risk.

Paragraph 7D "as is" without understanding it. Some sellers require buyers to sign a 7D waiver before accepting. This doesn't mean the seller won't make repairs — it means the buyer is purchasing the property in its current condition. Whether that's acceptable depends entirely on the inspection results, which the buyer should get regardless.

TREC 1-4 Contract and the Real Estate License Exam

If you're studying for the Texas real estate licensing exam, the TREC 1-4 contract is tested extensively. The license exam focuses on:

• Which TREC forms are required for which transaction types
• Earnest money rules (delivery timeline, who holds it, what happens at default)
• Option period mechanics — fee vs. earnest money, delivery requirements
• What constitutes a fixture vs. personal property
• Financing contingency provisions and buyer's rights
• Agent disclosure requirements and intermediary arrangements
• Closing and possession provisions

TREC updates the form periodically. Make sure you're studying the current version — the form number and promulgated date appear on the footer of each page. Older versions sometimes remain in practice longer than they should, but the exam tests current promulgated forms.

TREC Contract Addenda

The 1-4 contract rarely stands alone. Common addenda that modify or supplement the base contract:

• Third Party Financing Addendum: Required when the buyer is financing through a conventional loan, FHA, VA, or USDA — spells out financing contingency details
• Seller Financing Addendum: When the seller carries the note
• Addendum for Sale of Other Property by Buyer: When purchase is contingent on buyer selling another property first
• Short Sale Addendum: When the seller's proceeds won't cover the existing mortgage
• Property Located Seaward of the Gulf Intracoastal Waterway: Beach property has specific additional disclosures

Each addendum is a TREC-promulgated form that agents must use as-is, with limited exceptions for specific situations where a custom addendum drafted by an attorney may be appropriate.