A Brief Introduction About the Texas Realestate Contract
Texas realestate contract can be entered into, if you wish to buy or sell a property in Texas state. This would include both commercial and residential real estate.
The Texas commercial realestate contract is different from the contracts used for residential real estate. There is a due diligence investigation in commercial real estate contracts where the financial background of the company is examined before the contract is signed. Ownership and joint venture matters need to be considered. Pre-closing conditions, preparing for closing, and resolving post-closing items need to be handled before signing the contract.
What is the effective date of a Texas realestate contract?
The effective date of a real estate contract is the date on which the last communication by either the buyer or the seller took place, signifying acceptance of the contract. According to Texas real estate contract law, the realtor cannot provide legal advice to any party. Only licensed brokers are eligible to use the Texas real estate commission form.
Who Takes the Texas Realestate Contract – People Involved
The buyer and seller of private and business land in the territory of Texas go into this agreement.
Both parties need to ensure that the contract is drafted according to the applicable law relating to either residential or commercial real estate for the transaction to be valid. This will help both parties when they seek any legal remedy for violation of the Texas Realestate contract.
Purpose of the Texas Realestate Contract – Why Do You Need It
When you enter into a real estate contract, then both the buyer and the seller have certain contractual obligations that need to be fulfilled. The buyer needs to pay the agreed consideration to the seller, and the seller has to ensure that the property is transferred to the buyer within the due date mentioned in the agreement. In case of such contracts, the seller can also request a pre-approval letter from the buyer to make sure that the buyer is serious about the purchase.
When presenting the contract to the buyer, ensure that the buyer has made a substantial down payment and therefore committed money. The seller could also include an ‘as is’ provision, which says that the buyer has to buy the property in its present condition, and any repair or renovations will not be covered under the sale amount.
Before buying a property, the buyer can inspect the property, get it appraised, and consult a lawyer. If there is no real estate contract, the buyer will not have the right to inspect the property or get it evaluated. The buyer will have no protection if the condition of the property is not worth the price. The seller cannot ask the buyer to commit to the contract by making a down payment.
Contents of the Texas Realestate Contract – Inclusions
A Texas home purchase contract should include all the clauses necessary to protect the interests of both parties to the contract.
The content of a real estate contract should be as under:
- The names of the parties, the buyer and the seller
- The effective date of the agreement
- The City and County of Texas where the agreement is being signed
- Consideration and conditions for payment: The agreed purchase price for the property and whether it shall be paid in full at the time of closing the sale, subject to the purchaser ability to get a mortgage loan within a stipulated period or after deduction of outstanding balance against existing mortgage or payment of purchase price according to a land contract
- Earnest money deposit: The earnest money deposit is returned to the buyer if the offer is not accepted. If accepted, it will be adjusted against the purchase price
- Taxes, assessments, and adjustments: All rent and rent due until the date of the contract should be cleared by the seller
- Title to the property: The seller has to provide the buyer with a clear title to the property free of all liens and encumbrances
- Possession of the property: The date on which the possession of the property will be given to the buyer will be mentioned. If the seller does not transfer the property on the given date, the seller will have to pay a specific amount as damages for breach of contract.
- Risk of loss: If the property is damaged due to fire or otherwise before the closing of the contract, the agreement is null and void.
How to Draft the Texas Realestate Contract – Points to Consider While Preparing the Agreement
You can use a Texas realestate offer form as a reference for drafting a contract. An addendum can be added to the form if the parties to the contract want to make any changes to the standard clauses to the contract.
Here are the points you need to keep in mind while drafting Texas Realestate Contract:
- Eligibility to participate: The parties to the contract should be over the age of 18, mentally sound and should not be coerced or under the influence of drugs
- Consideration for the contract: You need to know whether the purchase price will be paid in full when the contract is closed when the purchaser can get a mortgage, setting of the outstanding balance of the existing mortgage against the consideration for the present contract
- Evaluating the contract terms: There should be no deception by any party, and the contract should have been prepared in good faith
- Confidentiality clause: The non-disclosure clause ensures that sensitive information is not shared with the third party
- Dispute resolution clause: This clause will simplify the resolution of disputes and mention whether it will be settled by arbitration or litigation, the legal jurisdiction and the payment of attorney fees
- Termination clause: If the agreement is to be prematurely terminated, then the notice period to be served by both parties
- Governing laws: The contract should adhere to the laws of the state
- Signature and dates: The last page of the contract should be reserved for this
The seller should present the terms and conditions of the Texas realestate contract to the buyer. The buyer should exercise due diligence, inspect the property, and have it evaluated to find the present condition. If there is a lot of repair work to be done, then the buyer can negotiate with the seller to get the price, which is less than the fair market value.
Benefits & Drawbacks of the Texas Realestate Contract
The benefits of the Texas realestate contract are as follows:
- Protection of interest: The interests of both the buyer and seller are protected by this contract. The seller can get a down payment for the property before the contract is signed and the buyer is assured about the quality of the property
- Inspection of property: The buyer can have the property inspected and appraised to determine whether the price being asked by the seller is fair or not
- Termination of contract: If the property is damaged due to fire or any other cause, then the property stands terminated. The other events which lead to termination of the contract are non-payment of agreed price by buyer or suppression of information by the seller
The drawbacks of the Texas realestate contract are given below:
- No serious buyers: The seller will not be able to sell the property as he cannot ask any buyer for a down-payment. Both parties will be wasting their time without any results
- Condition of property: The buyer will not be able to verify the condition of the property before buying. This will discourage the buyer from making an offer
- No legal recourse: In case of violation of any part of the agreement, neither party can take any action as there is no official contract
What Happens in Case of Violation of Texas Realestate Contract?
In case of violation of the Texas Realestate contract, both parties can try and resolve the matter amicably. If a resolution is not possible, then a notice is sent by the injured party to the party violating the contract. If the notice is not heeded, then the injured party has to take legal action.
Below are the remedies available to both parties:
- Money Damages: The party violating the contract has to compensate the injured party for financial losses. The type of breach determines the compensation. If there is a total breach, then the injured party will receive if the contract been fulfilled, including lost profits. For partial breach, the charges would equal to the amount required for finding a suitable replacement.
- Restitution: The injured party should be restored to the position before the contract. There will be no compensation for the loss of profits. The money or property given by the injured party has to be returned to them.
- Rescission: Where either party has entered the contract by mistake, undue influence, or fraud. The parties to the contract don’t have any further contractual obligations
- Reformation: A contract is reformed when the court finds that the contract is not fair to both parties and decides to rewrite the contract.
- Specific performance: In the case of this particular remedy, the party who has violated the contract has to fulfill the contract as agreed initially as the money damages are not adequate to compensate for losses.
You can get the Texas realestate contract forms free online and use it as a reference to draft a contract. If you want to modify any clause, then an addendum stating the changes can be incorporated in the contract instead of amending any clause as this is preferred by brokers. As far as Texas realestate forms are concerned, the most commonly used is the Family Residential Contract. When real estate investment is concerned, this is the best choice of form. It is advisable to use special provisions addendum to the contract and check the ‘other box.’
The special provisions addendum should only be used for making minor changes. For significant changes, an attorney should be consulted. The Texas realestate contract should also have a dispute resolution clause  so that there would be no delay in the process. The non-disclosure clause should be included so that neither party discloses confidential information related to the contract to a third party.