5 Ways to Avoid Contract Problems

With more than two dozen TREC forms and 130-plus Texas REALTORS® forms, you have the tools to help your clients keep transactions on track. By using forms properly, you reduce your and your clients’ risk of misunderstandings—and even lawsuits. Here are some general tips to keep in mind:

Amendments

Proposing an amendment to a contract—or refusing to accept a proposed amendment—does not give either party a unilateral right to terminate an existing contract. The contract is only changed after the parties sign the amendment signifying their agreement. Without a fully executed amendment, the original contract remains in effect as written.

Outdated Forms

If you receive an offer on your listing on an outdated TREC or Texas REALTORS® contract form, present the offer to your seller and tell him that it’s on an outdated form. Next, inform the other broker that the contract form used was outdated and that the other broker is obligated under TREC rules to use a current form. If your seller intends to counter the offer, draft the counteroffer on a current form. If your seller wants to accept the offer on the older form and not move the sale to a current form, urge the seller to seek the advice of counsel before doing so.

Counting Days

When calculating deadlines, TREC and Texas REALTORS® contracts use calendar days, not business days. This includes weekends and holidays unless the provision provides for an exception. One notable exception is found in the Earnest Money provision of TREC’s current One to Four Family Residential Contract (Resale) (TXR 1601), which allows that if the final day for performance (delivery of the earnest money) falls on a weekend or legal holiday, then the date for performance is moved to the next day that is not a weekend or legal holiday. This exception is extended to the delivery of the option fee in the recently adopted update to the One to Four Family Residential Contract (Resale) that becomes mandatory for use April 1.

Altering Contracts

Only cross out part of an existing contract if specifically directed to do so in writing by your client. Your client should give you written instructions that specify the desired changes. You should also advise your client to contact an attorney for legal advice about the effect of striking out contract language.

Verbal Agreements

Verbal agreements must be reduced to writing and signed by the buyer and seller to become a valid contract. If the offer remains verbal, a contract is never created, nor signed; there is nothing for the buyer to enforce. While verbal negotiations of contracts can be a quicker way to reach an agreement, verbal agreements are not enforceable for the sale of real property.