Happy Friday class! We’re diving in to section 7 of a residential real estate contract in Texas. It’s a long section, but worth reviewing because it’s probably the biggest concern for the seller and the buyer as it relates to closing. The Property Condition portion of the contract covers all aspects of a property’s condition, disclosures, and repairs.
- Section A covers access, inspections, and utilities. Simply, the seller give the buyer (and their agent) permission to enter the property for inspections, and requires all utilities be live for such inspection.
- Section B handles Seller’s Disclosures, and has three dispositions, of which one can be selected: the buyer has received the seller’s disclosure, the buyer has not received the notice, or the seller is not required to give a disclosure. If the buyer has not received the disclosure, the seller has a negotiable amount of time to provide the document. Failure to do so gives the buyer the right to cancel to the contract and receive their earnest money back. Once the buyer receives the seller’s disclosure notice, they have seven days in which they may terminate the contract and receive their earnest money back. There are instances where the seller is not required to give a seller’s disclosure notice, the most common sellers that are excluded from the requirement are; a builder of a new home, a trustee or executor of an estate, and a lender who has foreclosed on a property. There are 11 exemptions in the law, but these are the three you’ll see most often.
- Section C is a commonality for any real estate contract across the country, where federal law mandates that all properties built before 1978 require lead based paint and lead based paint hazard disclosures.
- Section D talks about accepting the property “as is.” The buyer still has the right to conduct property inspections and negotiate or terminate the contract.
- Section E deals with lender-required repairs. According to the contract, neither party (buyer or seller) is responsible for paying for lender-required repairs. If the buyer and seller cannot come to agreement as to who will pay for these repairs, the contract can be terminated and the buyer will receive their earnest money back. The buyer may also terminate and receive their earnest money back if the total cost of lender-required repairs exceeds 5% of the sales price.
- Section F states that all repairs must be performed prior to the closing date, who can legally perform those repairs. Any permits obtained or transferable warranties go to the buyer at their expense. Should the seller fail to complete the repairs before closing, the buyer may elect to extend the closing date, or ultimately terminate the contract.
- Section G discloses environmental conditions (asbestos, wetlands, endangered species) that may affect the buyer’s intended use of the property.
- Section H allows the buyer to ask the seller to pay for a residential service contract, commonly known as a home warranty. Home warranties are also sometimes offered at the time the house is placed for sale, so the buyer knows ahead of time that the property will come with a seller-financed home warranty.
And that’s Property Condition in a residential Texas Real Estate Contract! While we won’t be back in class until after the holiday, we are available for house showings all weekend long. Like this incredible family home at 3310 Waterford Drive, Rowlett, or this amazing, recently-reduced waterfront home for sale on Lake Ray Hubbard.