Key Takeaways
• The Option Period is a buyer's most powerful tool, providing a time-sensitive, unrestricted right to terminate the contract for any reason; missing the strict deadline to pay the Option Fee forfeits this right.
• Accepting a property "As Is" does not prevent a buyer from requesting repairs based on inspections, nor does it protect a seller who fraudulently conceals known material defects.
• A major recent contract update requires any seller contribution to the buyer's broker fees to be explicitly negotiated and written into the sales contract, separate from other seller-paid closing costs.
• Real estate agents are prohibited from giving legal advice; a real estate attorney should be consulted for legal questions or for drafting custom clauses, especially in the high-risk "Special Provisions" section.
A Paragraph-by-Paragraph Guide to the Texas Real Estate Contract
Welcome to the blueprint of your real estate deal. Think of the TREC 1-4 Family Residential Contract (Resale) as the official, standardized roadmap for buying or selling a home in Texas. The Texas Real Estate Commission, or TREC, created this document to ensure fairness and clarity. If you are working with a licensed real estate agent to buy or sell a single-family home, duplex, triplex, or fourplex that is not brand new, this is the form they are required to use.
The real estate world is always changing, and this contract changes with it. It is a living document, updated to keep up with new laws, technology, and market practices. The latest version has major updates focused on making sure everyone clearly understands how real estate agents are paid—a direct response to a nationwide push for greater transparency.
It is just as important to understand what this document is not. It is an offer until everyone signs, at which point it becomes a legally binding contract. It is not used for new homes, condominiums, or farm and ranch properties, which have their own specialized forms. Finally, this guide is not legal advice. Your agent is an expert in filling out this form, but they are prohibited from giving legal advice. If you have questions about your rights or obligations, you should always consult a real estate attorney. Before we dive in, here are the key players:
• Seller: The person or entity selling the property.
• Buyer: The person or entity buying the property.
• Parties: The Buyer and Seller together.
• Escrow Agent: A neutral third party, usually a title company, that holds the money and documents safely until the deal is closed.
• Effective Date: The date the contract becomes official—when the last person signs and communicates their acceptance. This is "Day Zero" for almost all deadlines.
The Anatomy of the Deal: A Paragraph-by-Paragraph Analysis
This is the heart of your contract. We will go through it exactly as you will see it on the page.
Paragraph 1: Parties
This paragraph officially identifies the full legal names of the Seller and Buyer. Using nicknames or informal names is a common mistake that can cause delays. The names here must be the exact legal names that will appear on the final title documents. Critically, if the property is the seller’s primary residence (homestead), Texas law requires both spouses to sign the deed. Failing to include a homestead-owning spouse as a party to the contract can create a fatal defect in the agreement.
Paragraph 2: Property
This defines exactly what is being sold: the Land, Improvements, and Accessories. The Land section requires the property's legal description, such as the Lot, Block, and Addition name; an incorrect legal description can render the entire contract unenforceable. Improvements are things permanently attached and built-in, like cabinets and ceiling fans. Accessories are items that also stay but are not necessarily attached, like garage door openers and pool equipment. A critical spot is 2D. Exclusions, where the seller must list any fixture or accessory they plan to take. 2E. Reservations is for reserving rights like minerals, but this must be done with a separate addendum.
Paragraph 3: Sales Price
This breaks down the total price into the Cash Portion (your down payment) plus the Financing amount, which equals the total Sales Price. A common pitfall for buyers is confusing the "Cash Portion" with the total "cash to close." The actual amount of cash you will need at closing will be higher because it also includes closing costs, lender fees, and prepaid items like insurance and taxes.
Paragraph 4: Leases
The seller must disclose any leases that will continue after the sale. This could be a tenant living in the home, a lease for solar panels, or a propane tank lease. A 2025 update added the term "geothermal" to the list of natural resource leases that must be disclosed.
Paragraph 5: Earnest Money and Termination Option
This paragraph is the procedural core of getting the contract started. It governs the Earnest Money, a deposit showing you are a serious buyer, and the Option Fee, a smaller, non-refundable fee paid for the "Option Period." This period is a negotiated number of days where you have the unrestricted right to terminate the contract for any reason (your time for inspections) and get your earnest money back. You have exactly three calendar days from the Effective Date to deliver both fees to the Escrow Agent. This deadline is governed by the phrase "time is of the essence," meaning it is absolute. The consequences for missing the deadline are distinct and severe: if the Option Fee is late, the buyer loses their unrestricted right to terminate. If the Earnest Money is late, the seller gains the right to terminate the contract before the money arrives.
Paragraph 6: Title Policy and Survey
This section deals with proving the seller has the right to sell the property. The seller provides a Title Policy (insurance protecting you from title defects) and a Survey (a map of the property's boundaries). A 2025 update simplifies this, as sellers can now use a T-47.1 Declaration form that does not require a notary. The 6D. Objections section gives you the right to object to issues on the title commitment or survey, such as an easement that would prevent you from building a pool. If the seller cannot fix your objection, you can terminate. Another 2025 update requires sellers to provide any mold remediation certificates from the past five years.
Paragraph 7: Property Condition
This paragraph covers the physical state of the property. Sellers must typically provide a Seller's Disclosure Notice detailing their knowledge of the property's condition. This section also contains the widely misunderstood "As Is" clause. Accepting a property "As Is" means you accept it in its present condition. However, this does not waive the seller's legal duty to disclose known material defects. An "as is" clause protects an honest, disclosing seller from post-closing claims about defects they were unaware of; it does not protect a seller who fraudulently conceals a known issue. The Repairs section is only for listing specific repairs the seller agrees to make initially. All other repair negotiations should happen during the option period and be formalized with an Amendment form.
Paragraph 8: Brokers and Sales Agents
This is a disclosure section. An agent must check a box here if they are a principal in the transaction or are related to one of the parties.
Paragraph 9: Closing
This sets the closing date. It is written as "on or before" a certain date, allowing for an earlier closing if everyone is ready.
Paragraph 10: Possession
This defines when you get the keys, which is typically "upon closing and funding." If the seller needs to stay in the house after closing, a separate Temporary Residential Lease form is required.
Paragraph 11: Special Provisions
This small blank space carries immense risk. This section is a danger zone and should only be used for factual statements or business details for which TREC has not already created a form. Agents are strictly prohibited from writing legal clauses here, as it is considered the unauthorized practice of law (UPL). The safest rule is to write nothing here. If you need a special clause, consult an attorney.
Paragraph 12: Settlement and Other Expenses
This section explains who pays for what and contains the biggest changes for 2025. The new structure clarifies that the seller pays their own listing broker. The game-changing update is in 12A(1)(b), a blank space where the seller can agree to pay a specific amount or percentage toward the buyer's broker fees. This is now negotiated directly in the purchase offer. Section 12A(1)(c) is for other seller contributions toward the buyer's closing costs, like title policy fees. It is now explicitly stated that this money cannot be used to pay the buyer's broker.
Paragraph 13: Prorations
This section ensures fairness by splitting ongoing expenses like property taxes and HOA dues between the buyer and seller based on the closing date.
Paragraph 14: Casualty Loss
This is the "what if the house burns down before closing" clause. If the property is damaged, this defines your options, which include terminating, extending the closing for repairs, or taking the property with the seller's insurance proceeds.
Paragraph 15: Default
This paragraph explains what happens if someone breaks the contract. If the buyer defaults, the seller can usually keep the earnest money as damages. If the seller defaults, the buyer can get their earnest money back and potentially sue to force the sale (specific performance).
Paragraph 16: Mediation
This requires the buyer and seller to try to resolve any dispute through mediation with a neutral third party before filing a lawsuit.
Paragraph 17: Attorney's Fees
This is the "loser pays" rule. In a lawsuit over the contract, the winning party can recover their reasonable attorney's fees. This is only triggered after a formal lawsuit is filed and a judgment is made; it does not apply to mediation costs.
Paragraph 18: Escrow
This outlines the Escrow Agent's duties and the process for handling earnest money disputes if the contract terminates.
Paragraph 19: Representations
This states that all previous promises are merged into the written contract. If a seller's verbal promise—like "I'll leave the refrigerator"—is not in writing in the final contract and its addenda, it is not enforceable.
Paragraph 20: Federal Tax Requirements
This clause ensures compliance with a federal law (FIRPTA) that applies if the seller is a "foreign person." In most cases, this does not come into play.
Paragraph 21: Notices
This lists the official email and mailing addresses for the buyer and seller. All formal notices must be sent to these addresses to be legally valid. Leaving this blank is a critical oversight that can lead to disputes.
Paragraph 22: Agreement of Parties
This serves as a checklist of all addenda (additional forms) that are part of the contract. If an addendum is used but its box isn't checked, a dispute could arise over whether its terms are enforceable. A 2025 update added a new box for the "Addendum for Section 1031 Exchange."
Paragraph 23: Termination Option
This is now intentionally left blank. Its contents were moved to Paragraph 5 for better organization.
Paragraph 24: Consult an Attorney
This is a final, direct warning that your agent cannot give legal advice and that you should consult an attorney if you have any questions about the contract's legal effects.
The final pages are for signatures, broker information, and the title company's receipt of the Earnest Money and Option Fee.
The Broader Legal Landscape
The contract operates within a world shaped by new Texas laws. A foreign ownership law adds due diligence requirements for certain buyers. Recent zoning bills may impact how you can use your property. And new laws to combat fraudulent deeds highlight the importance of the title insurance you receive under Paragraph 6.
Frequently Asked Questions
Do I have to sign this specific form?
If you are working with a licensed real estate agent in Texas for this type of sale, yes. TREC requires them to use this form to ensure a standard level of protection for all parties.
What is the "Option Period" and why is it so important?
It is your unrestricted escape hatch. For a small, non-refundable fee, you get a negotiated number of days to perform inspections and back out of the contract for any reason at all while having your earnest money returned. It is the most powerful tool a buyer has for due diligence.
Does "As Is" mean I cannot ask for repairs?
Not at all. "As Is" refers to the property's condition when you make the offer. You still use your option period to inspect the home. If inspections uncover issues, you can negotiate with the seller for repairs or a price reduction using an "Amendment to Contract." If you cannot reach an agreement, you can terminate during your option period.
What happens if my financing falls through?
If you are using the Third Party Financing Addendum, you are protected. The 2025 update to this form requires you to provide the lender's written denial letter as proof. If you are denied a loan for reasons beyond your control and give proper notice, you can terminate the contract and get your earnest money back.
Your Path Forward
You have done the hard part—you have educated yourself. Now that you know what the sections mean, read through your specific offer carefully. Your real estate agent is your expert guide for your situation. If you have any concerns about your legal rights or complex issues, do not hesitate to consult a real estate attorney for peace of mind. Once you are comfortable and all your questions have been answered, you can move forward, knowing you understand the blueprint for your transaction.
