Should a broker fill in the effective date for a short-sale contract?

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A pair of glasses and a silver pen sit on top of a contract.

11/13/2015 | Author: Editorial Staff

I’m a broker with a sales contract that’s been executed by the buyer and my seller. The price is less than what the seller owes, and the sale is subject to the lender's approval. Should I fill in the effective date?

Yes. The effective date of any contract, even a short-sale contract, should always be filled in by the broker. Even though the sale is subject to the approval of the lender, there is still a contract between the buyer and the seller. The effectiveness of the contract is not subject to lender approval, so the effective date should be filled in as with all contracts.

The Short Sale Addendum (TAR 1918) should always be attached to the contract in this situation to protect both the buyer and the seller because there is a contractual agreement between the parties where each has certain performance requirements and because the seller's ability to perform under the contract is subject to the lender’s approval. The addendum makes it clear that the contract is binding upon execution by the seller and the buyer, and that the earnest money and option fee must be paid as provided in the contract.

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Categories: Forms, Legal
Tags: legal, legal faq, forms, short sale, contracts


Theresa Akin on 12/02/2015

When I’m representing a buyer on the criteria of their search for a property,  I explain short sales and the process and addendum. I let them decide if they want to proceed. It can be an almost normal process or longer than usual.  I never submit a contract for escrow and have the escrow officer enter an effective date. Irritates me when the listing agent does not have it listed as a short sale. Have complained to the board couple times in the past. Now I just ask. Then proceed.

David Davis on 11/20/2015

Rick make some very good points. However I would be interested to know what rule from TREC requires us to fill in all blanks

Rick DeVoss on 11/20/2015

It seems we are talking about several issues here, and sorry for getting on board late.  I just today received this newsletter.
If either agent takes a contract to a title company without an “effective date” being filled in, then they have failed their responsibilities.  And if Agent #2 fails to write it in, Agent #1 can do so before delivering it to the title company.
If you have taken a contract to a title company who then fills in anything on a legal contract, you need to switch title companies, and never go back!

All agents need to remember that TREC directs that we fill in ALL blanks on the form to make it a legally binding contract and to protect our clients.

But I have seen some listing agents who would make a change (a seller’s counter) on the offer, and then write in an effective date before sending it back to the buyer’s agent.  (as if it were pre-agreed upon)  This could have the effect of shortening the Option period, and may not be in the best interest of your client.

And let’s not forget what we learned in contracts class:  A contract is not legally binding until it has been accepted back by the last party to receive it after an offer or counter offer has been initialed by the other party.  It is NOT binding just because someone writes an effective date on it.  You must have acceptance by both parties and a meeting of the minds.

A buyer’s agent should never be submitting an offer on a property that they did not know was a short sale.  And they should always use the addendum to protect the buyer.  Please read it carefully to your client before having them sign it.



Doris Snipp on 11/20/2015

The effective date is filled in by the person who collected the last initials or signature to make a binding contract without any added changes.

Laura Ausitn on 11/19/2015

Totally agree with David.  It is not the responsibility of the Title Company to fill in the Effective Date or collect the Option Fee either. That is the responsibility of the Broker/Agent.  I would not want to put my buyer at risk of losing the option period by not making sure the seller received the option fee in time.

David Davis on 11/13/2015

Cliff,  You are correct.  However, either the selling broker, or the listing broker should enter the effective date.  Certainly not the escrow officer or title company.  How is it that they would even know the effective date?

Cliff Brock on 11/13/2015

As to inserting the Effective Date;
I occasion recently that while receipting a contract the title company escrow officer presumed to enter that date as ED.

In my understanding, entering the ED is the duty of the listing broker and a title company has no standing to be deciding on the ED much less assuming to do so.

If I am correct, should this be a issue for TAR or TREC to clarify with title agencies?

David Davis on 11/13/2015

And if the property is listed in MLS it’s status MUST be changed to Pending.  Houston allows the choice of Pending, Option Pending, or Pending Continue To Show.  Houston MLS is beginning to issue fines for not complying with this rule.

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Legal disclaimer

The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem. Applicability of the legal principles discussed in this material may differ substantially in individual situations.

While the Texas Association of REALTORS® has used reasonable efforts in collecting and preparing materials included here, due to the rapidly changing nature of the real estate marketplace and the law, and our reliance on information provided by outside sources, the Texas Association of REALTORS® makes no representation, warranty, or guarantee of the accuracy or reliability of any information provided here or elsewhere on Any legal or other information found here, on, or at other sites to which we link, should be verified before it is relied upon.

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