How to Fill Out the Texas Short Sale Addendum (TREC Form 45-2)

The TREC Form 45-2 Short Sale Addendum is the one-page attachment you add to a Texas residential purchase contract when the seller’s mortgage balance is higher than what the sale will bring in. You download it from the Texas Real Estate Commission’s forms page, fill in a single critical date, and sign it alongside the main contract. The addendum makes the whole deal contingent on the seller’s lender (or lenders) agreeing in writing to accept the net sale proceeds as full payment and release the lien.¹

Where to Get the Form and When You Have to Use It

The current version is a free PDF at trec.texas.gov/forms/short-sale-addendum-0.² Licensed Texas real estate agents are required to use TREC-promulgated forms when a transaction falls within the form’s scope, and 22 Texas Administrative Code §537.52 adopts Form 45-2 for short sales.³ The underlying authority is Texas Occupations Code §1101.155, which lets the commission require license holders to use forms drafted by the Broker-Lawyer Committee.⁴

Agents can only fill in factual information and business details on the blanks. Adding or rewording substantive terms crosses into the unauthorized practice of law and violates TREC rules.⁵ A seller working with their own attorney can use a different form, but title companies and lenders expect the TREC addendum, so changing forms usually creates more friction than it solves.

Walking Through the Six Paragraphs

The addendum has six lettered paragraphs. Only one has a blank you have to fill in. The rest are pre-printed terms you need to understand before you sign, because they govern everything that happens between contract execution and closing.

Paragraph A: Defining the Short Sale

Paragraph A states that the seller’s net proceeds at closing won’t cover the mortgage balance and that the seller needs the lienholder’s written consent to sell plus the lienholder’s agreement to accept those net proceeds as full satisfaction of the debt and deliver a recordable release of lien.¹ Nothing to fill in. The phrase “Lienholder’s Consent and Agreement” is defined here and referenced throughout the rest of the form.

Paragraph B: Seller’s Net Proceeds

Paragraph B defines “Seller’s net proceeds” as the sales price minus the seller’s expenses under Paragraph 12 of the main contract (title policy, survey, and similar closing costs) and any brokerage fees.¹ No blanks. This is the number the lender will scrutinize, so pull current mortgage statements and a preliminary title commitment before you negotiate the price.

Paragraph C: The Contingency

Paragraph C does the heavy lifting. It confirms the contract is binding on both parties the moment they sign and that the buyer pays earnest money and any option fee on the usual schedule. The contract itself, however, is contingent on the seller actually obtaining the Lienholder’s Consent and Agreement. The seller must apply promptly and make every reasonable effort to secure consent, including turning over whatever documents the lender asks for. Neither party has to perform under the main contract while the contingency is unsatisfied, except as the addendum itself provides.¹

This creates the holding pattern that defines every short sale. The buyer’s earnest money sits in escrow. The seller can’t deliver title. The buyer doesn’t need to lock final financing. A seller who slow-walks the lender’s hardship paperwork can be accused of failing to make “every reasonable effort,” which gives the buyer a basis to terminate.

Paragraph D: The Deadline You Have to Fill In

Paragraph D holds the one blank you absolutely cannot leave empty: the calendar date by which the seller must notify the buyer that Lienholder’s Consent and Agreement has been obtained. If that date passes without consent, the contract automatically terminates and the earnest money is refunded to the buyer.¹

Pick this date carefully. Lender reviews commonly take 30 to 90 days, longer when the lender orders a new appraisal or broker price opinion or when more than one lien is involved. Too tight and the deal dies before the lender even responds. Too loose and the buyer’s money is tied up for months with no exit.

Paragraph D also introduces the “Amended Effective Date,” which is the date the seller delivers written notice to the buyer that the lender has consented. From that moment, every time-sensitive deadline in the main contract (inspection period, financing contingency, additional earnest money) resets and runs from the Amended Effective Date rather than the original signing date.¹ The buyer effectively gets a fresh option period once the deal is actually viable.

Paragraph E: Lender Refusal or Withdrawal

Approval isn’t permanent until closing funds. If the lienholder refuses or withdraws its Consent and Agreement at any point before closing, the contract terminates and the earnest money is refunded. The seller must notify the buyer promptly if that happens.¹ This protects a buyer who has already paid for inspections and an appraisal when the lender reverses course late in the process.

Paragraph F: The Buyer’s Option Period

Paragraph F clarifies how the buyer’s unrestricted right to terminate interacts with the delay. The option-period clock starts on the original effective date, continues running through the Amended Effective Date, and expires at the end of the agreed option period as measured from the Amended Effective Date.¹ In plain terms, the buyer still gets a full option period to walk, but it’s measured from after lender consent arrives.

What Happens After Both Parties Sign

Once the addendum is signed, the seller (usually through the listing agent) submits the full contract package to the lender’s loss mitigation department. The lender’s review typically covers three things: verifying the seller’s financial hardship, ordering an independent property valuation, and comparing the offered price to that valuation. The process commonly takes 30 to 90 days and runs longer when multiple lienholders each conduct their own review.

Expect the lender to come back asking for more: updated bank statements, tax returns, a hardship letter, proof of income. Fast responses keep the file moving. Delayed responses are the single most common reason short sale approvals stall. The buyer’s job during this stretch is mostly to keep earnest money on deposit and stay in touch about the lender’s progress so no one is surprised when the Paragraph D deadline nears.

Three outcomes are possible. The lender approves, the seller delivers written notice, the Amended Effective Date triggers, and the deal proceeds like any ordinary closing. The lender counters at a higher price the buyer won’t match, and the parties either renegotiate or terminate. Or the deadline simply arrives with no approval, and the contract ends automatically with the earnest money returned.

Read the Lender’s Approval Letter Before You Close

Signing the addendum does not, by itself, protect a seller from being chased later for whatever the lender doesn’t recover. Most Texas home loans are recourse, which means the lender can potentially sue for the shortfall (the “deficiency”) after the sale unless they agree in writing to give up that right.

The document that controls this is the lender’s written consent referenced in Paragraph A. It should expressly state that the lender accepts the net proceeds “in full satisfaction” of the seller’s liability and agrees to release the lien.¹ If it does, the deficiency is waived. If it uses vague language or reserves the lender’s right to pursue the remaining balance, the seller can close and still get sued later. Have an attorney read the approval letter before closing. This is where short sales go wrong after the fact, and it is entirely preventable.

Tax and Credit Consequences to Know Before Signing

Forgiven mortgage debt is generally taxable income. If the lender writes off more than $600, you’ll receive a Form 1099-C reporting the canceled amount in Box 2.⁶ Two exclusions under 26 U.S.C. §108 can reduce or eliminate the tax.⁷ The insolvency exclusion applies if your total liabilities exceeded the fair market value of your total assets immediately before the discharge; you claim it by filing IRS Form 982, checking the box on line 1b, and entering the excluded amount on line 2.⁸ The qualified principal residence indebtedness exclusion is more limited: it only applies to discharges before January 1, 2026, or those made pursuant to a written arrangement entered into before that date. For a short sale closing in 2026 without a pre-existing written arrangement, that exclusion is gone, though insolvency remains available. Many short sale sellers are insolvent almost by definition.

A short sale can appear on your credit report for up to seven years and typically produces a significant score drop comparable to a deed-in-lieu of foreclosure. If you plan to buy again, the waiting periods differ by program. FHA generally requires three years from the title transfer date, but you may qualify immediately if you stayed current on all mortgage and installment payments during the 12 months before the short sale, or as little as 12 months with documented extenuating circumstances and reestablished credit.⁹ Fannie Mae conventional loans require four years from the completion date on your credit report, or two years with documented extenuating circumstances.¹⁰ Factoring these timelines into the decision before signing the addendum avoids surprises on the other side.

1
Texas Real Estate Commission. TREC Form 45-2 – Short Sale Addendum
2
Texas Real Estate Commission. Short Sale Addendum
3
Legal Information Institute. 22 Tex Admin Code 537.52 – Standard Contract Form TREC No. 45-2, Short Sale Addendum
4
State of Texas. Texas Occupations Code 1101.155
5
Texas Real Estate Commission. Rules and Laws
6
Internal Revenue Service. Instructions for Forms 1099-A and 1099-C
7
Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
8
Internal Revenue Service. Instructions for Form 982
9
U.S. Department of Housing and Urban Development. Mortgagee Letter 2013-26
10
Fannie Mae. Significant Derogatory Credit Events – Waiting Periods and Re-Establishing Credit