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Addendums for the TREC Contract In Depth
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1/14/21
Addendums to the TREC Contract: In-Depth Presented by: Roland Love Vice President – Business Alliances & Field Operations
Independence Title Company Email: rlove@independencetitle.com Phone: 214-964-9820
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Contract Addenda More Recently Updated Addenda and Forms: • • • •
Third Party Financing Addendum Addendum Concerning Right to Terminate Due to Lender's Appraisal Notice of Buyer’s Termination of Contract Notice of Seller’s Termination of Contract
11/19/2019 11/15/18 11/15/18 08/13/18
Form Form Form Form
#40-9 #49-1 #38-6 #50-0
12/05/2011 12/05/2011 08/18/2014 11/19/2019 11/18/2014 10/10/2011
Form #11-7 Form #10-6 Form #36-8 Form #48-1 Form #44-2 Form #OP-L
Commonly Used Addenda: • • • • • •
Addendum Addendum Addendum Addendum Addendum Addendum
for for for for for for
"Back-Up" Contract Sale of Other Property by Buyer Property Subject to Mandatory Membership in a POA Authorizing Hydrostatic Testing Reservation of Oil, Gas and Other Minerals Seller's Disclosure of Information on Lead-Based Paint
Other Addenda: • • • • • • • • • • •
Buyer's Temporary Residential Lease 12/05/2011 Form #16-5 Seller's Temporary Residential Lease 12/05/2011 Form #15-5 Seller Financing Addendum 11/02/2015 Form #26-7 Loan Assumption Addendum 12/05/2011 Form #41-2 Addendum for Release of Liability on Assumed Loan / Restoration of VA Entitlement 12/05/2011 Form #12-3 Addendum for Coastal Area Property 12/05/2011 Form #33-2 Addendum for Property Located Seaward of the Gulf Intercoastal Waterway 12/05/2011 Form #34-4 Addendum for Property in a Propane Gas System Service Area 02/01/2014 Form #47-0 Environmental Assessment, Threatened of Endangered Species, and Wetlands 12/05/2011 Form #28-2 Short Sale Addendum 12/05/2011 Form #45-1 Non-Realty Items Addendum 10/10/2011 Form #OP-M
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Contract References 2. Property: OP-M (Non-Realty Items) E. Reservations: 44-2 (Minerals) 3. B Sum of all financing described in the attached: 40-9 (Third Party), 41-2 (Assumption), 26-7 (Seller Finance). See also 49-1 (Appraisal), 10-6 (Sale of Other Property), 45-1 (Short Sale), 12-3 (VA Release). 5. Earnest Money: 50-0 (Termination) 6. E. Title Notices (2) Membership in Property Owners Association(s) 36-8 (POA) (4) Tide Waters 33-2 (Coastal Area) (9) Propane Gas System Service Area 47-0 (Propane Service System) 7. Property Condition: A. Access Inspections and Utilities 48-1 (Hydrostatic Testing) B. Seller’s Disclosure Notice OP-H (not an attached addendum) C. Seller’s Disclosure of Lead-Based Paint OP-L (Lead Based Paint) G. Environmental Matters 28-2 (Environmental) 3
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Contract References Continued… 10. Possession: 16-5, 15-5 (Leases) 11. Special Provisions: Must use promulgated addendum, if one. See e.g., 10-6 (Buyer Sale of Other Property) 12. Settlement and Other Expenses: 45-1 (Short Sale) 15. Default: 38-6, 50-0 (Notices of Termination) 19. Representations: 11-7 (Back Up Contract) 22. Agreement of Parties: See listed addenda. 23. Termination Option: 38-6 (Notice) Don’t Forget 39-8 Amendment Others without specific references: 10-6 (Buyer Sale of Other Property), 34-4 (Property Seaward of Intracoastal Waterway).
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Third Party Financing Addendum Updated Addendum The proposed revisions were approved at the TREC Commissioner’s meeting on 11/15/2018. Use of the forms was mandatory on 3/1/2019 Redlines show the reformatting of the form to use paragraph lettering to be consistent with the format of other TREC forms. This Addendum was again modified effective 11/19/2019 to make it clear that paragraph 2 is time sensitive. 5
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Third Party Financing Addendum
Discuss with Buyer as to what type of financing they require in order to purchase the property. 7
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Third Party Financing Addendum
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Third Party Financing Addendum
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Third Party Financing Addendum APPROVAL OF FINANCING: Approval for the financing described above will be deemed to have been obtained when Buyer Approval and Property Approval are obtained. Time is of the essence for this paragraph and strict compliance with the time for performance is required.
¶2A Buyer Approval: q Buyer to give written notice of termination within X days to Seller. If Buyer does not terminate within time period, contract is no longer subject to Buyer Approval. q Contract not subject to Buyer obtaining Buyer Approval 10
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Third Party Financing Addendum ¶2B Property Approval now requires Buyer to give Seller written notice of termination AND written statement from lender evidencing their determination of property approval at least 3 days before closing. 2. APPROVAL OF FINANCING: Approval for the financing described above will be deemed to have been obtained when Buyer Approval and Property Approval are obtained. Time is of the essence for this paragraph and strict compliance with the time for performance is required.
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Third Party Financing Addendum
¶2B Property Approval: Buyer to give written notice of termination at least 3 days before closing and must provide written statement from lender setting forth the reasons for lender’s determination. If Buyer does not terminate timely, Property Approval is deemed to have been obtained. 12
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Third Party Financing Addendum
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Third Party Financing Addendum
¶5 now includes “settlement statements” in addition to closing disclosures that may be released to brokers and agents as provided under Broker Information on page 9. 14
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Addendum Concerning Right to Terminate Due to Lender’s Appraisal Updated Addendum 49-1
The proposed revisions were approved at the TREC Commissioner’s meeting on 11/15/2018. Use of the forms was mandatory on 3/1/2019 Minor revisions to make the form more clear.
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Addendum Concerning Right to Terminate Due to Lender’s Appraisal Not required to be used with Third Party Financing! Can be used when the Buyer wishes to modify the right to terminate under ¶2B of the Third Party Financing Addendum. Cannot be used if the transaction involves FHA or VA financing.
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Addendum Concerning Right to Terminate Due to Lender’s Appraisal
Box 1 – Buyer agrees to cover the difference if the lender’s appraised value is lower than the sales price. – Buyer must have additional cash to cover this difference – No $ limit on value difference 17
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Addendum Concerning Right to Terminate Due to Lender’s Appraisal
Box 2 – Basically the same as Box 1, but with a limit on how much additional cash the buyer is willing to supply to cover the difference. – Example: • contract purchase price is $350,000, buyer only wants to cover $20,000 difference. Parties put $330,000 in Box 2 (ii). • If the appraisal comes in at $330,000 or more, the buyer cannot terminate. • If the appraisal comes in at less than $330,000, the buyer MAY terminate the contract.
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Addendum Concerning Right to Terminate Due to Lender’s Appraisal
Box 3 – Buyer may terminate if the appraisal does not satisfy the lender’s underwriting requirement. – AND, even if it does satisfy them, buyer may still terminate if the appraisal is less than an agreed value. – Good option to use if Buyer is concerned a lower appraisal might still meet the lender’s underwriting requirements.
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Notice of Buyer’s Termination of Contract Updated Form Now has 8 options to select when Buyer terminates. 3 revised/new choices: q (3) Property Approval q (6) Appraisal Addendum q (7) Objections to title/survey are not timely cured 20
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Notice of Seller’sTermination of Contract New Form 2 options to select when Seller terminates. q (1) Buyer failed to deposit EM timely and before notice of Seller’s termination q (2) Other 21
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Addendum for “Back-Up” Contract ¶A: EM and Option Fee paid according to the Back-Up Contract. All other requirements contingent on termination of 1st Contract. ¶B: If 1st Contract does not terminate by specific date, Back-Up Contract terminates. If First Contract terminates, Effective Date of Back-Up Contract is amended. ¶D: Option Period runs from Effective Date of Back-Up and continues after Amended Effective Date
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Addendum for Sale of Other Property by Buyer (10-6)
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Addendum for Sale of Other Property by Buyer
¶A: Enter Buyer’s other property address and date they need to sell it in order to proceed with the purchase of their new property. ¶B: Enter the amount of days after Seller notifies Buyer of new offer that Buyer will need to waive the contingency.
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Addendum for Sale of Other Property by Buyer
¶C: To waive the contingency, Buyer will notify Seller and deposit $___ of add’l EM.
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Addendum for Property Subject to Mandatory Membership in a Property Owners Association
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Addendum for Property Subject to Mandatory Membership in a Property Owners Association
¶A Within X amount of days and who will pay. 1. Seller 2. Buyer 3. Buyer 4. See ¶E 27
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Addendum for Property Subject to Mandatory Membership in a Property Owners Association
¶C Fees: Enter the amount that the Buyer is willing to pay towards all other fees. ¶D Deposits For Reserves: Buyer’s expense ¶E Authorization: Check box for who pays if Buyer does not require information, but Title Company does 28
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Addendum for Authorizing Hydrostatic Testing Paragraph 7A – refers to this form now Advises consulting a licensed plumber about risks.
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Addendum for Reservation of Oil, Gas, and Other Minerals
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Addendum for Seller’s Disclosure of Information on LeadBased Paint and Lead-Based Paint Hazards as Required by Federal Law
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Buyer’s Temporary Residential Lease
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Buyer’s Temporary Residential Lease
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Seller’s Temporary Residential Lease
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Seller’s Temporary Residential Lease
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Seller Financing Addendum
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Seller Financing Addendum
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Loan Assumption Addendum
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Loan Assumption Addendum
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Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller’s VA Entitlement
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Addendum for Coastal Area Property
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Addendum for Property Located Seaward of the Gulf Intercoastal Waterway
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Addendum for Property in a Propane Gas System Service Area
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Environmental Assessment, Threatened or Endangered Species, and Wetland Addendum
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Short Sale Addendum
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Non-Realty Items Addendum
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THANK YOU FOR ATTENDING!
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