How to Read a Texas Real Estate Contract: A Buyer’s Plain-English Guide
The TREC One to Four Family Residential Contract
When you make an offer on a home in Texas, you'll use the TREC One to Four Family Residential Contract (Form 20-18) — the standard purchase agreement approved by the Texas Real Estate Commission. Here's a plain-English breakdown of the most important sections.
Section 2: Property
This defines exactly what's included in the sale: the lot, the house, and any fixtures. Pay close attention to exclusions — if the seller wants to keep the dining room chandelier, it should be listed here.
Section 3: Sales Price
This breaks down the purchase price into cash at closing plus any financing amount. It specifies whether your financing is contingent on getting a loan (Section 3B) — meaning you can back out without penalty if you can't get approved.
Section 5: Earnest Money
Earnest money is your "good faith" deposit, typically 1%–2% of the purchase price, held in escrow. If you back out during the option period, your earnest money is returned. If you back out after the option period without a valid contractual reason, the seller may keep it.
Section 6: Title Policy and Survey
In Texas, it's customary for the seller to pay for the title policy. This protects you against defects in the property's title history. The survey (confirming property boundaries) is typically a buyer expense.
Section 7: Property Condition
This section governs inspections. In Texas, buyers can get an inspection but are not automatically entitled to demand repairs — that's what the option period is for. Within the option period, you can negotiate repairs, price reductions, or credits, or walk away entirely.
Section 23: Option Period
For a small fee (typically $100–$500), you purchase an unrestricted right to terminate the contract during a set period (usually 5–10 days). During this time, you can back out for any reason and get your earnest money returned — one of the most buyer-friendly features in Texas real estate law.
Section 9: Closing
This specifies your expected closing date. Note that closing dates in Texas are agreed upon but can be extended by mutual agreement. If the buyer isn't ready to close and no extension is agreed, the seller could declare the buyer in default.
Sections 10–12: Possession, Special Provisions & Settlement
Section 12 covers seller contributions toward your closing costs (concessions). This is where you'd see "Seller to contribute $5,000 toward buyer's closing costs."
Common Addenda
Third Party Financing Addendum — loan contingency details
Seller's Disclosure Notice — what the seller knows about the property
HOA Addendum — HOA disclosure requirements
Amendment to Contract — repairs, credits, or changes after inspection
Why Having a Flat Fee Agent Matters
At KAT Realty, we review every line of the TREC contract with you before you sign. We explain your rights, flag risky clauses, and negotiate the best terms on your behalf — all for a flat $4,999 fee. Get started today.
