TREC Residential Contract: Complete Guide to the 1-4 Family Agreement

What Is the TREC 1-4 Contract?

The TREC 1-4 contract, officially called the One to Four Contract (Resale), is a promulgated form created by the Texas Commission. It serves as the standard for residential transactions in Texas involving one to four housing units. By law, estate use TREC-promulgated forms in most residential transactions rather than drafting their own contracts.

The term "promulgated" means the form has been mandated by the state regulatory body — TREC — and cannot be modified by agents without special authorization. Attorneys may draft custom contracts, and certain exceptions apply, but for the vast majority of Texas home sales, the 1-4 contract is the official document.

Understanding how this contract works is essential for both buyers and sellers. Whether you are preparing for your exam or navigating an actual home purchase, knowing each section's purpose, deadlines, and obligations keeps transactions on track and avoids costly disputes. The contract covers everything from the purchase price and financing terms to inspection rights, title commitments, and closing costs.

TREC updates its forms periodically, so always verify you are using the current version available at trec.texas.gov. Using an outdated form can expose an agent to disciplinary action and may create legal complications for the parties involved.

The 1-4 contract covers single-family homes, duplexes, triplexes, and four-plexes used as residential property. It does not apply to commercial , farm and ranch property, or new construction where the builder uses their own contract. For those transaction types, different TREC or custom forms apply. If you are a buyer or seller involved in a residential resale in Texas, however, the 1-4 contract is almost certainly the document governing your deal.

When both parties sign the contract and all conditions of acceptance are met, the document becomes a legally binding agreement. At that point, neither party can unilaterally withdraw without triggering the default and remedies provisions of the contract. This is why having a qualified estate agent or attorney review the document before signing is so important — every blank you fill in carries real legal weight.

Agents who fail to use a promulgated form without a legitimate exception — such as a transaction where the buyer is a licensed attorney drafting their own agreement — risk TREC disciplinary action ranging from a reprimand to license suspension. When in doubt, use the promulgated form and consult a broker or attorney for guidance on unusual situations.

Key Sections of the TREC 1-4 Contract

The TREC 1-4 contract is divided into numbered sections, each addressing a critical aspect of the transaction. Familiarity with each section helps both agents and their clients understand their rights and responsibilities throughout the process.

Section 1 — Parties: Identifies the buyer and seller by legal name. Accuracy here is critical — names must match government-issued identification and should correspond to the title vesting the seller currently holds.

Section 2 — Property: Describes the property being sold using the legal description, address, and any inclusions or exclusions (fixtures, appliances, accessories). Items listed as excluded must be removed prior to closing; items listed as included transfer to the buyer.

Section 3 — Sales Price: Specifies the total purchase price, broken into the cash portion and any financing amount. Third-party financing addenda attach here when the buyer uses a mortgage.

Section 4 — License Holder Disclosure: Requires disclosure of any broker who has an ownership interest in the property. This section exists to address potential conflicts of interest.

Section 5 — Earnest Money: States the earnest money amount, the title company holding it, and delivery deadlines. Failure to deliver earnest money on time can be a contract default.

Section 6 — Title Policy and Survey: Outlines who pays for the title commitment and owner's title policy (typically the seller in most Texas counties), survey requirements, and how title objections are handled.

Section 7 — Property Condition: Addresses the seller's disclosure notice, inspection rights, acceptance of property condition, and the option period for the buyer's due diligence. This is one of the most negotiated sections.

Section 8 — Broker Information: Captures the names and license numbers of all brokers and agents involved in the transaction, along with their compensation arrangements. This section ensures transparency about who is being paid and how.

Section 9 — Closing: Sets the closing date, the title company handling the closing, and possession details. The closing date is one of the most actively negotiated terms — buyers want enough time to secure financing, while sellers want to close as quickly as possible.

Section 10 — Possession: Addresses when the buyer takes physical possession of the property. Possession at closing is standard, but a Buyer's Temporary Residential Lease or Seller's Temporary Residential Lease can modify this if one party needs a different possession date.

Section 15 — Default: Outlines remedies when either party breaches the contract. If the buyer defaults, the seller may terminate and keep the earnest money or seek specific performance. If the seller defaults, the buyer may terminate and receive the earnest money back or also seek specific performance. Understanding this section is critical for anyone studying Texas law.

Buyer Obligations Under the TREC 1-4 Contract

As a buyer in a transaction, you take on several specific obligations the moment the contract is executed. Meeting each deadline and requirement protects your earnest money and keeps you in good standing under the agreement.

Earnest money delivery: The buyer must deliver the earnest money to the escrow agent — typically the title company — within the timeframe stated in Section 5. Most contracts require delivery within three business days of the effective date. If the buyer fails to deliver on time, the seller may have grounds to terminate and claim the earnest money as damages.

Option fee payment: If the buyer negotiates an option period for unrestricted inspection rights, the option fee must be paid directly to the seller (not the title company) within three days of the effective date. This fee is typically small ($100–$500) and is non-refundable. In exchange, the buyer gains the right to terminate the contract for any reason during the option period without losing earnest money.

Loan application and approval: Under Section 3 and the Third Party Financing Addendum, the buyer must apply for financing within a set number of days and provide documentation of loan approval. Failure to make a good-faith effort to secure financing can put the buyer's earnest money at risk.

Property inspection: While not legally required, buyers are strongly encouraged to hire licensed inspectors during the option period. The buyer arranges and pays for inspections. After inspection, the buyer may negotiate repairs using the TREC Repair Amendment or exercise the option to terminate if the findings are unsatisfactory.

Closing on time: The buyer must be ready to close on the closing date specified in Section 9. This means having funds verified and available, documents signed, and all conditions of the contract satisfied. Delays caused by the buyer may constitute a breach, giving the seller remedies under Section 15.

Beyond financial obligations, buyers are also responsible for reviewing all disclosures provided by the seller. The Seller's Disclosure of Property Condition (SDPC) must be reviewed carefully because the buyer's ability to terminate based on disclosed conditions typically expires with the option period. If a material defect is disclosed and the buyer proceeds past the option period without negotiating a remedy, the buyer generally accepts the property in that condition.

Buyers should also coordinate with their lender throughout the transaction. Lenders have their own timelines for appraisal, underwriting, and document preparation. Delays on the lending side frequently push closing dates — and while lender delays may be excused under the Third Party Financing Addendum, communication between the buyer, agent, and lender is essential to avoiding unnecessary contract extensions or defaults.

Earnest Money and the Option Period

Two of the most important negotiating tools in a Texas are the earnest money and the option period. Understanding how each works — and how they differ — is fundamental for anyone studying for the Texas exam or working through an actual transaction.

Earnest money is a deposit the buyer makes to demonstrate serious intent to purchase. In Texas, earnest money is held in escrow by the title company and applied toward the buyer's closing costs or purchase price at settlement. The amount is negotiable, but typically ranges from $500 to several thousand dollars depending on the price of the home. If the buyer backs out of the contract for reasons not permitted by the contract, the seller may be entitled to retain the earnest money as liquidated damages under Section 15.

Earnest money IS refundable to the buyer under specific circumstances — for example, if the seller fails to cure a title defect, if the buyer's loan is denied after a good-faith application, or if the seller defaults. The exact conditions for refundability are set out in the contract and its addenda, so both parties should read them carefully before signing.

The option period is a negotiated number of days (commonly 7–10 days) during which the buyer pays a small, non-refundable option fee directly to the seller. In exchange, the buyer gains an unrestricted right to terminate the contract for any reason. This gives the buyer time to conduct inspections, review HOA documents, verify financing, and assess the property without risking earnest money loss.

After the option period expires, the buyer loses the right to terminate for convenience. If the buyer then backs out for a reason not permitted by the contract, the earnest money is at risk. Smart buyers use the option period aggressively — scheduling inspections on day one, requesting repair amendments promptly, and deciding whether to proceed well before the deadline.

Timing the option period correctly is a strategic decision. In competitive markets, sellers may push for a shorter option period or a higher option fee to reduce the risk of buyers tying up the property and then walking away. Buyers, on the other hand, benefit from as long an option period as possible to thoroughly vet the property and negotiate repairs. Finding a middle ground that satisfies both parties while keeping the transaction moving forward is a key skill for estate agents.

Repair requests made during the option period are negotiated using the TREC Amendment to Contract (Repair Amendment). The seller can accept the buyer's repair list, counter with partial repairs or a credit, or refuse entirely. If the parties cannot reach an agreement on repairs, the buyer's best option — if still within the option period — is to exercise the termination right rather than accepting an unsatisfactory property. Once the option period expires without written termination, the buyer is contractually committed to proceed.

Closing the TREC Residential Transaction

Closing, also called settlement, is the final step in a Texas residential sale. At closing, the buyer and seller sign all transfer documents, funds change hands, and ownership officially transfers. Understanding what happens at closing — and what each party must bring — prevents last-minute surprises that can delay or derail the transaction.

In Texas, closings are handled by a title company or an attorney. The title company coordinates with the buyer's lender (if any), both agents, and all parties to prepare a closing disclosure and settlement statement (ALTA/RESPA). Buyers should review the closing disclosure at least three days before closing — federal law requires lenders to provide it in advance — to verify all loan terms, costs, and credits match expectations.

At closing, the buyer typically brings a cashier's check or wire transfer for the remaining down payment and closing costs. Personal checks are generally not accepted at closing. The seller signs a warranty deed transferring title to the buyer, and the buyer signs loan documents if financing is involved. Once all documents are signed and funds are received, the title company records the deed with the county clerk, officially completing the transaction.

Common closing costs for buyers in Texas include the loan origination fee, appraisal fee, title policy for the lender (if required), prepaid interest, property tax escrow setup, and homeowner's insurance. Sellers typically pay for the owner's title policy, commissions, and any agreed repair credits. These costs can be negotiated in the contract or addressed through seller concessions.

If either party cannot close by the contract date, Section 9 provides a procedure for extending the closing date by mutual agreement. However, one party cannot unilaterally delay closing without the other's consent. Failure to close on time without a valid contractual excuse may constitute a breach, triggering the remedies outlined in Section 15 of the TREC 1-4 contract.

One often-overlooked aspect of the closing process is the final walkthrough. Although not required by the TREC contract, a final walkthrough — typically conducted within 24 hours of closing — allows the buyer to verify that the property is in the same condition as when the contract was signed, that agreed repairs have been completed, and that all personal property has been removed or remains as agreed. Documenting any issues discovered during the walkthrough gives the buyer leverage to request credits or repairs before signing closing documents.

Post-closing, the title company disburses funds to all parties, including the seller's proceeds (after paying off any existing mortgage), commissions, and third-party fees. The buyer receives keys once the deed is recorded. Recording typically happens the same day in most Texas counties. Understanding this sequence helps buyers and sellers set realistic expectations about when funds will be available and when physical possession can occur.