8.1 TREC Promulgated Contract Forms
Key Takeaways
- TREC promulgates six residential contract forms; a license holder must use the appropriate promulgated form when one exists for the transaction
- The Broker-Lawyer Committee (6 brokers and 6 attorneys appointed by TREC and the State Bar) drafts and revises every promulgated form
- A license holder may fill in blanks and check boxes but may NOT draft contract language or add legal provisions—doing so is the unauthorized practice of law
- The One to Four Family Residential Contract (Resale), Form 20-18, is the most-used form and contains 23 numbered paragraphs
- Paragraph 5 creates the termination option: a non-refundable option fee buys an unrestricted right to terminate during the option period (typically 1-10 days)
What "Promulgated" Means
To promulgate a form means TREC officially adopts it and makes its use mandatory for license holders. Under Texas Real Estate License Act (TRELA) and TREC rules, when a TREC-promulgated form exists for a transaction, a sales agent or broker must use that form—they cannot substitute a self-drafted contract or a competitor's form.
The purpose is consumer protection: standardized, attorney-reviewed forms keep non-lawyer license holders from practicing law and protect the parties from defective contracts.
The Broker-Lawyer Committee
Promulgated forms are written and revised by the Texas Real Estate Broker-Lawyer Committee, a 13-member body:
| Members | Appointed By |
|---|---|
| 6 licensed brokers | TREC |
| 6 licensed attorneys | State Bar of Texas |
| 1 public member | Governor |
The committee drafts forms; TREC adopts them by rule. This is why agents may not alter the wording—the language has been deliberately balanced and legally vetted.
The Six Promulgated Contract Forms
TREC promulgates six residential purchase contracts, each for a specific property situation:
| Form | Use |
|---|---|
| One to Four Family Residential Contract (Resale) | Existing 1-4 unit homes (most common) |
| New Home Contract (Incomplete Construction) | Builder home not yet finished |
| New Home Contract (Completed Construction) | Builder home already built |
| Farm and Ranch Contract | Rural/agricultural property |
| Residential Condominium Contract (Resale) | Resale of a condominium unit |
| Unimproved Property Contract | Vacant land/lots |
Exam Tip: If asked which form to use, match the property to the situation—a resale single-family home uses the One to Four Family Residential Contract (Resale); a vacant lot uses the Unimproved Property Contract.
The Unauthorized Practice of Law Limit
A license holder is not a lawyer. TRELA permits a license holder only to complete a promulgated form, not to draft legal language. The line is precise and heavily tested:
| A License Holder MAY | A License Holder MAY NOT |
|---|---|
| Fill in blanks with factual business details | Draft or add legal clauses or special provisions |
| Check the appropriate boxes | Give legal advice about the contract's effect |
| State factual business terms in Paragraph 11 | Determine which legal addendum a transaction needs as legal advice |
| Attach a TREC or appropriate addendum | Write contingency language from scratch |
Paragraph 11 (Special Provisions) of the One to Four Family contract is where this trap lives: a license holder may insert only factual statements and business details, never language that creates new legal rights, obligations, or contingencies. Drafting such language is the unauthorized practice of law (UPL), a TRELA violation that can lead to discipline up to license revocation.
The One to Four Family Residential Contract (Resale)
This is the workhorse of Texas residential sales and the form the state exam emphasizes most. The current revision is Form 20-18 (effective January 3, 2025). It has 23 numbered paragraphs. Key paragraphs to know:
- Para 1 – Parties: Seller and buyer
- Para 2 – Property: Legal description; what conveys (improvements, accessories such as built-ins, and—new in 20-18—generators)
- Para 3 – Sales Price: Cash portion plus financing
- Para 4 – Leases: Discloses any existing residential, fixture, or natural-resource leases on the property
- Para 5 – Earnest Money and Termination Option: the earnest money, the option fee, and the unrestricted termination right are combined in this paragraph
- Para 6 – Title Policy and Survey
- Para 7 – Property Condition
- Para 8 – Brokers and Sales Agents: broker disclosure and how brokers are paid
- Para 9 – Closing
- Para 11 – Special Provisions (factual statements only)
- Para 23 – Consult an Attorney Before Signing
Addenda: Building the Deal
Because the base contract can't cover every situation, TREC promulgates addenda that attach to it (checked in Paragraph 22). Common ones:
| Addendum (TREC Form) | Purpose |
|---|---|
| Third Party Financing Addendum (40-11) | Makes the sale contingent on the buyer obtaining a stated loan; buyer's earnest money is refundable if financing is denied within the approval period |
| Seller's Temporary Residential Lease (15-7) | Lets the seller stay up to 90 days after closing (leaseback) |
| Buyer's Temporary Residential Lease (16-7) | Lets the buyer occupy before closing |
| Addendum for Property Subject to Mandatory HOA Membership (36-10) | Required when a property owners' association exists |
| Addendum for Sale of Other Property by Buyer (10-7) | Buyer's purchase contingent on selling their current home |
| Addendum for Reservation of Oil, Gas, and Other Minerals (44-3) | Reserves mineral rights to the seller |
Key Distinction: The Third Party Financing Addendum protects the buyer's earnest money. If the loan is denied during the approval period, the buyer terminates and earnest money is refunded. This is different from the option fee, which is non-refundable.
Amendments and the Termination Option
Amendment
Once a contract is executed, changes require the Amendment to Contract (TREC Form 39-10)—NOT an addendum. An addendum adds terms at the time of contracting; an amendment changes an existing, signed contract (e.g., adjusting the price after inspection negotiations). Both parties must sign.
The Termination Option (Paragraph 5)
The option period is uniquely Texan. For a negotiated, non-refundable option fee, the buyer buys the unrestricted right to terminate for any reason during a stated number of days (commonly 1-10). If the buyer fails to deliver the option fee within 3 days of the effective date, the buyer has no unrestricted right to terminate. If the sale closes, the option fee is credited to the sales price.
| Money | Refundable? | If sale closes |
|---|---|---|
| Option fee | No (it buys the walk-away right) | Credited to sales price |
| Earnest money | Yes, if buyer terminates under a contract right | Applied to buyer's costs |
A buyer's agent wants to add a custom contingency clause stating the sale is void unless the buyer's mother approves the home. Where in the One to Four Family Residential Contract may the agent place language, and what is the limit?
Which body drafts and revises TREC's promulgated contract forms?
A buyer delivers a $300 option fee and a $5,000 earnest money deposit. During the option period, the buyer terminates simply because they found a home they like better. What happens to the two payments?