The purpose of this memorandum is to summarize the key changes to the TREC residential contract forms, as well as highlight Rattikin Title Company-approved procedures for handling transactions using the new contract.

As of May 15, 2018, the new TREC residential contract forms are mandatory for use in Realtor-negotiated residential contracts in Texas. While these forms are designed for use by licensed real estate professionals, many consumers (and attorneys, for that matter) rely on the forms as a well-balanced, comprehensive document to facilitate the sale and purchase of homes and other forms of residential and farm and ranch property.

In Texas, mineral rights are gold. With a booming oil and gas economy in the state and increased awareness of the value of these rights, real estate transactions can often become heated due to misinformation or misunderstandings. 

If a title search uncovers a judgment lien filed against the seller of a property, the title problem won’t necessarily scuttle the transaction. It is true that the lien cannot be ignored; it must be released by the creditor in order to close the transaction. The release isn’t automatic, but Texas law does provide two helpful strategies for sellers to effectively secure the release and close the deal.

While duplexes, townhomes, and condominiums all share some similarities as multi-unit residential properties, from a legal standpoint they vastly differ in several important aspects. Understanding these differences will lead to better representation of your clients interested in selling or purchasing units in a multi-family property.

A condominium represents a completely different animal from its cousins the duplex and the townhome. Differing contract forms and due diligence considerations make a condo deal a bit more sophisticated. A clear understanding of condo regimes will help facilitate a smooth condo transaction.

Does your Seller have an existing survey that accurately depicts the property as it is currently situated? Be sure to ask for it at your listing appointment, as it could save the parties a lot of money. Also, be sure to have your seller sign, have notarized, and deliver a T-47 Affidavit to the Buyer along with the survey at the time of Contract execution.

Misunderstandings regarding boundary lines and fence locations often lead to strained relationships between neighbors. Addressing encroachment issues prior to closing can help ensure that a buyer enjoys a more fulfilling ownership experience.

A prudent Buyer should understand the importance of reviewing title commitments, as well as the procedures for objecting to unacceptable title issues, in order to protect their investment in such a valuable asset.

Texas tradition dictates that sellers typically pay the title insurance premium at a real estate closing. It is the seller, after all, who warrants that the title is free and clear of title problems; it makes sense that such a warranty is backed up by a title insurance underwriter with the resources to cover a claim if a problem arises.

Divorces can be sticky—especially when it comes to shared property. Issues arise due to Texas community property laws, homestead and recording requirements—all while emotions run high and communication is broken. If you are assisting a client in the midst of a pending divorce, understanding the documentation and requirements of title transfer in divorce will help you prepare your clients for the road ahead. Here are a few of the more common title issues that can occur during a divorce. 

You show a home to a buyer and they absolutely fall in love with the home—especially the bathroom mirrors. They make an offer immediately, and the transaction closes within a few weeks. Moving day comes and your buyers realize the master bathroom mirrors that they fell in love with are gone…weren’t they part of the home? Not necessarily. 

A title endorsement is an addition or elimination of coverage to a basic title insurance policy. In some cases, endorsements can help further protect your client’s investment. For example, your buyer’s survey came back showing a fence situated within an easement. This is not covered in a standard Owner’s Policy of Title Insurance (“OTP”). However, an endorsement could add coverage for this situation. 

Q: What is a Seller’s Disclosure Notice?

A: Seller’s Disclosure Notices are a way for residential buyers to have as much information as possible about the condition of the property before purchase. These disclosures require the seller to document any known defects or malfunctions as well as maintenance history to the best of their knowledge.

It is important to understand that a TREC contract does not automatically terminate just because the other party defaults; additional steps must be taken to legally terminate the contract, claim the earnest money and enter into a subsequent contract with another party.

If your clients are faced with the need to evict a tenant, they should know that the process must be undertaken in strict adherence to the Texas statutes, and may take longer than expected. If a tenant knows how to play the game, they could stretch out the ordeal for well over a month before possession is finally obtained.

It is critical that all deal points and loose ends be completed to the satisfaction of all parties before any closing documents are signed. Post-closing walk-throughs and other contingencies placed on final funding are not allowed by lenders, and certainly lead to conflicts between the parties, agents and title companies.

Agents should exercise caution when assisting clients in the preparation of, and compliance with, the Mineral Reservation Addendum. The revised form is structured differently from its predecessor, leading some agents to fill out the form incorrectly.

In transactions where the mineral rights are reserved, it is important for the parties to understand exactly what “elements” are included in the definition of “minerals” retained by the seller, and what elements belong to the surface and therefore transferred to the buyer.

In the months prior to CFPB’s implementation of the new TRID/CD we advised you to make sure your client understands that a contract does not automatically terminate just because the other party defaults; additional steps must be taken to legally terminate the contract, claim the earnest money and enter into a subsequent contract with another party. It is especially important in an environment where deals are in peril of falling out due to closing documents not being available as the lending industry continues to acquaint itself with the new regulations and procedures. We discussed issues surrounding the return of earnest money and would be entitled to the earnest money.

While real estate instruments do not always have to be filed of record to be effective, proper recording with the county clerk provides important legal protections that should not be overlooked.

A prudent agent should exercise caution when adding terms to a contract in Paragraph 11. A poorly worded clause may lead to disagreements which can crater a transaction.