By John Hay
The Texas Real Estate Commission (TREC) implemented new promulgated forms earlier this spring which became mandatory May 15, 2018. Over the next few days we will explore many of the changes that are now a part of the TREC promulgated forms.
Contract Changes: Paragraph 5
The most specific requirements added to the contract are defining Effective Date (now a capitalized/defined term = means terms/obligations are specifically tied to the date) and “TIME IS OF THE ESSENCE”. Time is of the essence is a legal term of art which makes time in a certain part of a contract specific and actionable if not complied with by the required parties. Alert! The buyer MUST DELIVER THE EARNEST MONEY within 3 days after the Effective Date = Excluding weekends or legal holidays, this is a hard date. Buyers and real estate agents, it is critical to work with a title company who you trust to work hard, comply with the contract, properly and timely receipt the earnest money and lastly understand what is discussed in this section. If it is not tendered, the seller may terminate the contract WITHOUT discussion or warning. Period! If a buyer tenders after the date, and before a proper termination by the buyer, the contract remains in effect. These changes are a result of buyers failing to tender earnest money or the “check’s in the mail” but still wanting to have the protections and benefits under the contract. It is the buyer and buyer’s agent responsibility to monitor these dates.
BEST PRACTICES: be sure the Effective Date is accurate. Consider using a wire, FedEx or an app such as ZOCCAM to receive instant confirmation of delivery, or hand deliver. Reminder it is the date is based on delivery, not when mailed/sent.
NOTE: the option fee is also required in the same time frame and carries the same time is of the essence requirements, but in the option fee situation if it is not tendered timely paragraph is omitted from the contract and the buyer DOES NOT have the option to terminate.
Pay attention and review page the (new!) page 10 of the contract where Option Fee, Earnest Money, Contract Receipt and Additional Earnest Money are all split out with the DATE included.