TREC is unique among state real estate commissions in that it not only approves contract forms but actually promulgates (mandates the use of) specific forms for covered real estate transactions. Texas licensees who are parties to covered transactions must use these forms — they cannot use forms of their own creation or forms drafted by a third party (other than an attorney retained by the parties). Using a self-drafted contract instead of a promulgated form constitutes the unauthorized practice of law.
The rationale is consumer protection: TREC-promulgated forms have been reviewed by the Commission, attorneys, and practitioners to ensure they are legally sound. Consumers can rely on standard forms that courts and title companies understand.
| Form | Use Case | |------|----------| | One to Four Family Residential Contract (Resale) | Most common; resale of 1-4 unit residential property | | New Home Contract (Incomplete Construction) | Home under construction | | New Home Contract (Completed Construction) | Newly built but finished home | | Farm and Ranch Contract | Rural land with agricultural improvements | | Unimproved Property Contract | Land without significant improvements |
Commercial transactions — office buildings, retail, industrial, multi-family of 5+ units — do NOT have a TREC-promulgated form. Those contracts must be drafted by attorneys or agreed to by the parties.
In addition to the base contracts, TREC promulgates several addenda:
Licensed attorneys may draft real estate contracts on behalf of their clients without using TREC forms. This exception applies because the attorney is acting as legal counsel, not as a real estate licensee. In practice, attorney-drafted contracts appear most often in complex commercial deals or unusual transactions requiring custom terms.
Real-world example: A real estate agent is helping a seller close on a 200-acre ranch with a farmhouse, several outbuildings, and mineral rights the seller wants to retain. The agent uses the TREC Farm and Ranch Contract as the base form and attaches the Addendum for Reservation of Oil, Gas, and Other Minerals. Using a custom form the agent drafted herself would be unauthorized practice of law — the TREC promulgated forms exist precisely for this type of transaction.
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Quiz Questions:
Q1. Which transaction requires the use of a TREC-promulgated contract form?
A) A sale of a 12-unit apartment building by one investor to another B) A sale of a retail strip center through a licensed commercial broker C) A resale of a single-family home by an individual seller through a licensed agent D) A sale of raw commercial land in a business park
Answer: C — The resale of a single-family home through a licensed agent is the paradigmatic use of the TREC One to Four Family Residential Contract (Resale). Multi-family 5+ units (A), commercial property (B and D) do not have TREC-promulgated forms and require attorney-drafted contracts.
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Q2. A buyer's agent wants to make an offer on a historic property with unusual deed restrictions. She drafts her own two-page purchase contract that she believes better addresses the unique issues. Has she violated TREC rules?
A) No, because the agent drafted the form in good faith and the client approved it B) Yes, because agents must use TREC-promulgated forms for covered residential transactions; drafting a custom form is unauthorized practice of law C) No, as long as the contract contains all required elements of a valid contract D) Yes, but only if the seller's agent raises an objection to the custom form
Answer: B — Using a self-drafted contract instead of the applicable TREC-promulgated form is unauthorized practice of law, regardless of the agent's intent or the client's approval. The unusual deed restrictions can be addressed through addenda or by recommending the client consult an attorney.
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Q3. A Texas buyer needs financing to purchase a home and wants the contract to include protections if the loan falls through. Which TREC addendum should be attached?
A) Addendum for Sale of Other Property by Buyer B) Third Party Financing Addendum C) Short Sale Addendum D) Addendum for Reservation of Oil, Gas, and Other Minerals
Answer: B — The Third Party Financing Addendum governs the loan approval conditions, including the loan type, amount, and the buyer's rights to terminate and recover earnest money if financing cannot be obtained. This is the correct addendum for financing contingency protection.
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Q4. A Texas seller is selling a rural property but wants to retain all mineral rights in the land. Which TREC form addresses this situation?
A) Farm and Ranch Contract only — no addendum needed B) Unimproved Property Contract with Third Party Financing Addendum C) Farm and Ranch Contract with the Addendum for Reservation of Oil, Gas, and Other Minerals D) One to Four Family Residential Contract (Resale) — mineral rights are automatically excluded
Answer: C — The Farm and Ranch Contract is the appropriate base form for rural land with improvements, and the Addendum for Reservation of Oil, Gas, and Other Minerals is specifically designed to reserve mineral rights in a sale. Mineral rights are NOT automatically excluded from a sale — specific documentation is required.
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Q5. When may a licensed attorney draft a Texas real estate purchase contract without using a TREC-promulgated form?
A) Never; TREC promulgated forms are mandatory for all real estate transactions in Texas B) When the attorney is acting as legal counsel for one of the parties and drafting the contract as a legal service C) Only for commercial transactions worth more than $1 million D) Whenever the parties agree in writing that they prefer a custom contract
Answer: B — Licensed attorneys are permitted to draft real estate contracts for their clients as a legal service. This is the recognized exception to the mandatory TREC form rule. The attorney is providing legal counsel, not acting as a real estate licensee. Party preference alone (D) does not justify using non-promulgated forms if a licensee is involved.