When buying or selling land in Texas, an important decision is what contract form to use. If you're a realtor, you are required to use the Texas Real Estate Commission (TREC) contract forms.
Other people buying or selling land in Texas have additional options. You could have an attorney draft a custom contract for you, but this may be expensive.
You could also get a state-specific purchase agreement template from a legal document provider like Rocket Lawyer or LegalZoom. But why would you purchase these forms when the TREC contracts are free?
In this article, we'll explain what the unimproved property contract is and when to use it. We'll walk you through each aspect of the contract and provide real examples for you to follow along.
Key Takeaways
The Texas Real Estate Commission is the state agency responsible for governing real estate agents in Texas. Amongst other things, they create contract forms that realtors are required to use. Fortunately, these contract forms are also available to the public.
Although there are more options for a land buyer or seller who is not a licensed realtor, we recommend the TREC contract forms. There are three main reasons for this:
First of all, the contract terms are fair and balanced between the buyer and seller. Together with the addenda that can be added, it's also a comprehensive contract covering most situations.
Lastly, the contract is widely used and understood by everyone in the real estate industry. This includes third parties like title companies and lenders. This can help to make the whole real estate transaction smoother.
Where there can be some confusion is which contract form to use in which situation. That's what we cover next.
Although the TREC contract forms are great, it can be confusing which one to choose. There is more than one form that could be used for land.
It might be easiest to start with what the unimproved property contract is NOT used for. This contract form is for a property that does not have physical buildings, additions, or fixtures on the land.
The other key distinction is that the unimproved property contract is generally used for property that has been platted. This means that it has a recorded Lot/Block legal description. This is different than a metes and bounds property description, as we'll see below.
TREC also has a farm and ranch contract form. One key difference is that this contract is generally used for rural land with a metes and bounds legal description.
A metes and bounds legal description starts from a point of beginning. The description then goes around the perimeter of the parcel using angles and distances, eventually returning to the point of beginning.
The other main difference with this contract form is that it contains contract terms specific to farms and ranches. For example, items like fences, gates, sheds, outbuildings, and corrals are included in the land sale. Other items can optionally be included such as portable buildings, irrigation equipment, and fuel tanks.
The easiest way to find the TREC forms is to download the PDF forms directly from the contract section of the TREC website. They come as blank forms with fillable fields. If you prefer to complete them by hand, the forms are also printable.
Here is a brief overview of all the contract terms:
1. Parties. Use the full legal names of the buyer and seller.
2. Property. The lot, block, and Addition can be found on your property tax bill or the deed.
3. Sales Price. A is the cash amount due at closing (everything not being financed). B is the loan amount if any. C is the sale price.
4. Leases. Used for natural resource leases, if any.
5. Earnest money and termination option. A typical earnest money amount is 2% of the sale price. The Option Fee is usually a small amount like $100. You only need to fill an option fee amount if you’re entering a termination option period in B below.
6. Title policy and survey. In Texas, it’s customary for the seller to pay for the title policy and the buyer to pay for the survey if one does not already exist.
7. Property condition. Often, buyers will purchase land as-is.
8. Brokers and sales agents. This is a disclosure if there is a broker or real estate agent party to the contract that has an ownership interest in the property.
9. Closing. The parties should check the title company’s availability before deciding on a closing date.
10. Possession. Seller will deliver possession of the property to the buyer at closing.
11. Special provisions. Only use this after checking the TREC contract addenda. The addenda cover most situations.
12. Settlement and other expenses. States how closing costs will be split between buyer and seller.
13. Prorations and rollback taxes. Property taxes and other dues will be prorated through the closing date. For example, the seller would receive a credit if they’ve already paid the taxes through the end of the year and the closing is earlier.
14. Casualty. Describes what happens if any part of the property is damaged or destroyed before the closing.
15. Default. States what happens if either party breaches the contract.
16. Mediation. Any dispute that buyer and seller cannot resolve will go to mediation.
17. Attorney’s fees. If there is a legal dispute, the winning party can recover their legal costs.
18. Escrow. Describes how the escrow agent (title company) should handle the earnest money and what happens if the contract is terminated.
19. Representations. Any representations or warranties that seller makes in the contract apply even after closing.
20. Federal tax requirements. If seller meets the definition of a foreign person then buyer must withhold a portion of the purchase price and send it to the IRS. Normally, this would be handled by the title company, if applicable. (For more on taxes, see our article about avoiding capital gains in Texas).
21. Notices. Write the full contact information including address, phone, and email. This is helpful for other parties to the contract such as a lender or the title company.
22. Agreement of parties. Any addenda that will be attached to the contract should be checked off or listed.
23. Consult an attorney before signing. Buyer and seller may consult an attorney if they wish to do so.
Finally, the buyer and seller sign the contract. The execution date or date of final acceptance is when the last party signs.
Fill in the broker information, if applicable.
The final page lists is for the option fee and earnest money receipts. This is for the title company to complete once they have received those deposits.
This article is for informational purposes, and is not tax or legal advice. TREC contract forms are intended for use primarily by licensed real estate brokers or sales agents who are trained in their correct use.
