Legal FAQs for REALTORS®
— Contracts and Forms
Choice of Contracts
My client's listing is a home on a 15-acre tract. A buyer's agent submitted an offer for his client on the One to Four Family Residential Contract (Resale). My client is concerned that the residential form won't address the outstanding mineral interests, but the buyer's agent says he often uses this form for situations such as this and his client is OK with using that contract. Does the use of that form instead of the Farm and Ranch Contract make any difference? (Updated November 5, 2014)
Yes. Paragraph 6 of the Farm and Ranch Contract (TAR 1701, TREC 25-10) has specific language that deals with outstanding mineral interests that would be an exception to title in the owner's title policy and in any deed to the property. The Farm and Ranch Contract also covers outstanding surface leases, and any farm and ranch improvements and accessories that might be involved in this sale.
A buyer interested in purchasing the property even when mineral interests have already been conveyed to or reserved by another person can list the exception documents in the offer. The seller can provide documents that contain or reserve those mineral interests to any prospective buyer to list in Paragraph 6. When listed, those interests would be acknowledged by the parties and not subject to objection by the buyer during title commitment review.
To ensure the buyer and the seller have a meeting of the minds about the nature of the title to the property and the outstanding mineral interests, the seller could provide the appropriate documents to the buyer and require the use of the Farm and Ranch Contract as a condition of accepting any offer by this buyer.
My client bought a vacant lot in a neighborhood years ago and never built on it. Now he wants to sell the lot. Which listing agreement should I use to sell the property? (Updated Aug. 14, 2015)
The listing agreement you choose depends on how the buyer will likely use the property. If a buyer will probably use the lot for residential purposes, like building a home, the Residential Real Estate Listing Agreement, Exclusive Right to Sell (TAR 1101) would be the best choice.
To reduce the likelihood of confusing the seller, the listing broker, as a principal to the agreement, could delete the part of the agreement that applies to improvements, or add a statement in the Special Provisions paragraph indicating that the property is an unimproved lot.
These same considerations apply for selecting a listing agreement if the buyer’s likely intended use of the unimproved property would be for commercial or farm and ranch purposes.
My client wants to sell his house using a contract drafted by his attorney instead of the TREC-promulgated form. Is that OK? (updated Sept. 6, 2016)
Yes. While license holders are required by law to use a TREC-promulgated form when one exists for a particular transaction, there is an exception when your client, a principal to the transaction, requires you to use a contract prepared by his attorney. This exception only applies if the contract has been prepared by an attorney at the request of the principal. You should document that your client has made this requirement and remind him to direct any questions he may have about the contract to his attorney.
My client is involved in a transaction for which no TREC-promulgated form exists. Can my brokerage’s in-house attorney draft a form for the transaction? (updated April 23, 2015)
Yes. TREC rules allow a licensed attorney to draft a form for a particular kind of transaction when a TREC-promulgated form does not exist. This would include in-house counsel for a brokerage.
As a licensee, you can’t provide legal advice to your client regarding the legal effect of that form. If your clients have questions about their legal obligations contained in the form, they need to talk to an attorney who can represent their interest—not an attorney who represents your firm’s interest.
Remember that as a Texas REALTOR®, you also have access to more than a hundred forms for various types of real estate transactions that are not covered by TREC-promulgated forms. These include both residential and commercial forms.
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 TexasRealEstate.com. Any legal or other information found here, on TexasRealEstate.com, or at other sites to which we link, should be verified before it is relied upon.