The TREC 1-4 Family Residential Contract is the standardized resale contract that Texas licensed real estate agents must use when a buyer and seller trade a single-family home, duplex, triplex, or fourplex. It is published by the Texas Real Estate Commission as the One to Four Family Residential Contract (Resale), currently Form 20-18, and it carries both sides through offer, deposits, inspections, title work, and closing on a common set of terms.1Texas Real Estate Commission. One to Four Family Residential Contract (Resale) Understanding what each paragraph does is the difference between a smooth closing and a fight over earnest money.
Who Must Use the Form and Which Version Applies
Texas Occupations Code Section 1101.155 gives TREC authority to adopt contract forms drafted by the Texas Real Estate Broker-Lawyer Committee, and license holders must use them when representing buyers or sellers.2Texas Real Estate Commission. Can a Non-License Holder Use the Promulgated Contract Forms? Two exceptions exist: an agent can work from a form the property owner supplies, or from a contract an attorney drafts at the owner’s request. Unrepresented buyers and sellers are free to use any form they like, but in a brokered resale the TREC contract is almost always the document on the table.
The current version, Form 20-18, was adopted May 4, 2026. The revision added generators to the improvements that convey with the property, introduced language on groundwater and surface water rights, updated brokerage compensation provisions, and added a new Paragraph 20B requirement that the parties provide information needed for federal FinCEN reporting.3Texas Real Estate Commission. 22 TAC 537.28, Standard Contract Form TREC No. 20-18 Always pull the current form from TREC before writing an offer.
Parties and Property
Paragraph 1 requires the full legal names of every buyer and seller. A nickname or shortened name can cloud title and delay closing. If a trust or LLC is on either side, the entity’s exact legal name and the authorized signer’s name both need to appear.
Paragraph 2 describes the property. The legal description comes from county records and typically includes the lot number, block number, addition name, and street address. What conveys with the property covers more than the land and house:
- Improvements are permanently attached structures like the house, garage, fencing, and landscaping. Under the 2026 revision, generators are now explicitly included.3Texas Real Estate Commission. 22 TAC 537.28, Standard Contract Form TREC No. 20-18
- Accessories include items like window coverings, pool equipment, garage door openers, and built-in security systems.
- Exclusions are anything the seller intends to keep, such as an heirloom light fixture. If it isn’t listed as excluded, the buyer can reasonably expect it to stay.
The contract also addresses smart devices. At possession, the seller must hand over all access codes, usernames, and passwords for internet-connected devices tied to the property and disconnect their own personal devices from those systems. Skip this step and the new owner may discover the seller can still adjust the thermostat or view the cameras.
Sales Price and Financing
Paragraph 3 splits the purchase price into the cash portion, the amount being financed, and the total sales price. Those numbers have to reconcile exactly. When they don’t, the title company will flag the contract and closing stalls while everyone figures out which figure is wrong.
If the buyer is borrowing from a bank or credit union, the deal will include a Third Party Financing Addendum, a separate TREC form.4Texas Real Estate Commission. Third Party Financing Addendum That addendum sets out the loan type, interest rate, and approval conditions, and it gives the buyer a financing contingency: if the loan falls through despite good-faith effort, the buyer can terminate and recover the earnest money. Sellers should read the addendum carefully, because a loosely written financing contingency gives the buyer a wide exit.
Earnest Money and the Option Fee
Paragraph 5 covers two deposits that do very different jobs, and mixing them up is one of the most common mistakes in Texas residential transactions.
Earnest money is the good-faith deposit showing the buyer is serious. It typically runs between 1% and 3% of the sales price and is held in escrow by the title company. The buyer must deliver earnest money to the escrow agent within three days of the effective date.5Texas Real Estate Commission. We Are Selling Our House and the Buyer Never Paid the Option Fee. What Happens Now? The escrow agent must then place the funds in an escrow account by the close of business on the second working day after execution.6Texas Real Estate Commission. How Are Days Counted in a TREC Contract? Earnest money is not extra cost on top of the price; it gets credited toward the buyer’s closing costs or down payment.
The option fee is a separate, usually smaller payment that buys the buyer an unrestricted right to terminate for any reason during a negotiated option period. If the buyer fails to deliver the option fee within the required window, that termination right never takes effect.5Texas Real Estate Commission. We Are Selling Our House and the Buyer Never Paid the Option Fee. What Happens Now? Unrestricted means what it sounds like: the buyer can walk over inspection results, cold feet, or no reason at all, so long as written notice reaches the seller before the option period expires. Missing either deadline, for earnest money or the option fee, can cost the buyer their rights under the contract.
Title Policy and Survey
Paragraph 6 covers the title commitment and survey. Together they confirm that the seller actually owns what they are selling and that the property lines are where everyone thinks they are.
The seller typically pays for the owner’s title insurance policy, which protects the buyer against undiscovered liens, ownership disputes, and recording errors. The title company issues a commitment that lists exceptions to coverage, such as existing easements or mineral reservations. Anything listed there is something the policy will not cover, so buyers should read the exceptions closely.
If the parties use an existing survey rather than ordering a new one, the seller must provide a T-47 Residential Real Property Affidavit. That notarized document confirms no changes have been made to the property boundaries, structures, or improvements since the survey was completed.7Texas Department of Insurance. Residential Real Property Affidavit (T-47) A new survey removes the need for the affidavit but costs the buyer several hundred dollars. Which route makes sense depends on how old the existing survey is and whether the property has changed since.
If the buyer objects to items in the title commitment or survey, the seller generally has 15 days to cure. If the cure pushes past the original closing date, the closing date extends automatically to accommodate it.
Property Condition, Disclosures, and Inspections
Paragraph 7 handles the physical condition of the property, the required disclosures, and the negotiation around repairs.
Seller’s Disclosure Notice
Texas Property Code Section 5.008 requires the seller of a residence to give the buyer a written disclosure of known property conditions, including roof leaks, foundation problems, prior flooding, and termite damage.8State of Texas. Texas Property Code 5-008 – Sellers Disclosure of Property Condition The key word is “known.” Sellers do not have to hire an inspector, but they cannot hide defects they are aware of.
Several transfers are exempt from the disclosure requirement:
- Foreclosure sales and court-ordered transfers
- Transfers by a trustee in bankruptcy
- Fiduciary transfers during estate administration, guardianship, or trust management
- Transfers between co-owners, spouses, or direct-line family members
- Sales of new construction that has never been occupied
- Sales to or from a government entity
Buyers purchasing from an estate executor or at a foreclosure auction should expect no formal disclosure and plan inspections accordingly.8State of Texas. Texas Property Code 5-008 – Sellers Disclosure of Property Condition
Lead-Based Paint Disclosure
For any home built before 1978, federal law adds a separate lead-based paint disclosure on top of state rules. The seller must reveal known lead paint hazards, provide available inspection records, and give the buyer a lead hazard information pamphlet. The buyer also gets a 10-day window to conduct their own lead inspection before being bound by the contract.9eCFR. 24 CFR Part 35 Subpart A – Disclosure of Known Lead-Based Paint Hazards Upon Sale or Lease of Residential Property No other environmental hazard, including radon, asbestos, or flood risk, triggers a federal disclosure requirement in a residential sale.
Inspections and Repairs
The seller must keep utilities on during the entire contract period so inspectors can evaluate every system. Buyers can accept the property as-is or negotiate specific repairs. If the parties agree to repairs, the seller must complete them before closing. If the repairs are not done on time, the buyer can either exercise default remedies or extend the closing date by up to five days to let the seller finish.
Lender-required repairs are a separate negotiation. If the buyer’s appraiser or lender demands a fix before the loan can close, the seller is not automatically responsible for the cost. The parties have to agree in writing, and that conversation can become a sticking point late in the deal.
Closing Date, Prorations, and Possession
Paragraph 9 sets the closing date. If either party fails to close on time, the other side can pursue the default remedies in Paragraph 15. The date is not always fixed: it extends automatically when the seller needs additional time to cure title objections, and the buyer can extend it by up to five days for incomplete repairs. Any other change requires a written amendment signed by both parties.
Paragraph 13 requires property taxes, HOA dues, interest, and rents to be prorated through the closing date. Taxes trip people up most often. Because Texas property taxes are paid in arrears, the seller usually owes for the portion of the year before closing, and that amount is estimated at the closing table. When the actual tax bill turns out different from the estimate, the parties are required to adjust the prorations once the final statement arrives. If taxes have not been paid before closing, the buyer takes responsibility for the full year’s bill.
Under Paragraph 10, the default is that the buyer takes possession upon closing and funding. If the seller needs to stay after closing, or the buyer wants to move in before closing, the parties must sign a separate TREC temporary residential lease. Without a written lease, any early or extended occupancy creates a tenancy at sufferance, a legal limbo that exposes both sides to financial risk. The contract itself warns both parties to check with their insurance agent before any change in possession timing, because coverage gaps are common during these transitions.
Special Provisions and Amending the Contract
Paragraph 11 is the contract’s catch-all for factual statements and business details not addressed elsewhere. An agent might use it to note that the seller will leave the refrigerator, or that the buyer needs the sale contingent on selling their current home. The line between a permissible business detail and the unauthorized practice of law is real and enforced. TREC rules prohibit license holders from adding anything except factual matters or business details to a promulgated form.10Texas Real Estate Commission. Rules and Laws Drafting legal clauses, interpreting contract terms for a client, or materially modifying the agreement all cross into attorney territory.
Once the contract is signed, any change requires a written amendment signed by both parties. TREC publishes a promulgated Amendment to Contract, Form 39-10, for the purpose.11Texas Real Estate Commission. Amendment to Contract Common amendments extend the closing date, adjust the sales price after repair negotiations, or modify financing terms. Verbal agreements to change the deal are not enforceable no matter how well-intentioned. Every change goes through the amendment form.
Default Remedies and Mediation
Paragraph 15 sets out what happens when one side fails to perform. If the buyer defaults, the seller’s primary remedy is to keep the earnest money as liquidated damages. If the seller defaults, the buyer can pursue specific performance (a court order forcing the seller to complete the sale) or seek other legal remedies.
Paragraph 16 puts a speed bump in front of litigation. Any dispute the parties cannot resolve informally must first go to a mutually agreed mediator, with costs split equally. Mediation does not prevent a lawsuit, but a judge will likely ask whether it was attempted first, and it resolves a surprising number of real estate disputes without the cost of litigation. Either party can still seek emergency equitable relief from a court without going through mediation first.
Execution and the Effective Date
The contract is not binding until every party has signed and the acceptance has been communicated to the other side. The effective date is the date of final acceptance, meaning the day the last person to sign communicates that acceptance to the other party or their agent. The broker who receives that final communication fills in the effective date, and every deadline in the agreement, from earnest money delivery to option period expiration to closing, starts running from that moment.
Electronic signatures are valid in Texas under the Uniform Electronic Transactions Act, codified in Chapter 322 of the Texas Business and Commerce Code.12Justia. Texas Business and Commerce Code 322-003 – Scope Most transactions today are signed electronically, and lenders, title companies, and courts all accept them. Ink signatures work too. Either method produces a binding contract.
Once execution is complete, the contract goes to the title company to start the escrow process. The title company receipts the contract and the earnest money, providing a formal acknowledgment that both are in hand. That receipt matters because it proves the buyer met the financial deadlines.
FIRPTA When the Seller Is a Foreign Person
If the seller is a foreign person or entity, federal tax rules add a layer the TREC contract itself does not spell out. Under the Foreign Investment in Real Property Tax Act, the buyer must withhold 15% of the sales price and remit it to the IRS.13Internal Revenue Service. FIRPTA Withholding The buyer reports and pays the withholding on IRS Form 8288, which must be filed within 20 days after closing.14Internal Revenue Service. Reporting and Paying Tax on U.S. Real Property Interests
An important exception applies when the buyer is an individual who plans to use the property as a personal residence and the sales price is $300,000 or less. In that case FIRPTA withholding is waived entirely. To qualify, the buyer or a family member must intend to live in the home for at least half the days it is in use during each of the first two years after closing.15Internal Revenue Service. Exceptions from FIRPTA Withholding Above that threshold, the withholding obligation sits with the buyer, and failing to comply can make the buyer personally liable for the tax. Texas title companies routinely handle FIRPTA compliance, but the legal responsibility belongs to the buyer.