The buyers may be happy with the condition of a property, but their lender could require repairs before committing to a mortgage loan. That’s when Paragraph 7E of the One to Four Family Residential Contract (Resale) (TXR 1601, TREC 20-14) comes into play.

Just because the lender asks for repairs doesn’t mean the repairs will be made. According to Paragraph 7E, absent another written agreement, neither party is obligated to pay for lender-required repairs. The parties can negotiate who will pay for those repairs. If the parties don’t reach an agreement, the contract will terminate, and the buyer will be refunded his earnest money. Also, if the cost of the lender-required repairs exceeds 5% of the sales price, the buyer can terminate the contract and receive his earnest money back.