New Contract Forms + Buyer Agent Commission (Effective January 3, 2025)

The recent changes to the TREC forms have significant implications for how commissions are addressed in contracts. Below is a detailed guide for both buyer and listing agents on how to navigate these changes, with an emphasis on the use of paragraph 12 and TXR-2402.

Buyer Side: Writing Offers

1. Using Paragraph 12a1b
   • When drafting an offer, include buyer agent commission in paragraph 12a1b and only 12a1b unless cooperative compensation is offered.
   • Leave page 10 blank unless the listing agent has specifically states they are offering cooperative compensation (e.g., "6% split as 3% and 3%").
2. When a Co-Broker Commission (Cooperative Compensation) Is Confirmed
   • If the listing agent has confirmed cooperative compensation:
     • Leave 12a1b blank or supplement with the appropriate compensation you and your buyer agreed upon in your representation agreement.
     • Ensure the TXR-2402 form is signed before submitting the offer.
     • Fill out the commission details on page 10 of the contract.
     • Example: 12a1b = 1% and TXR-2402/pg. 10 2%
3. Best Practices
   • Double-check with the listing agent before including any cooperative compensation details to avoid having to re-write. Best practice is to use 12a1b as the default commission schedule.
   • Consult the ASM team and/or colleagues during any transition period.

The old commission addenda - both ABOR/Unlock and TXR - both still work, but they're unnecessary.

Listing Side: Handling Offers

1. For Listings with Open-Ended BAC 
   • This is the best practice for any and all listing agreements. 
   • If your listing agreement specifies an open-ended buyer agent commission (BAC), you should:
     • Use paragraph 12a1b in the offer to specify the commission.

2. For Listings offering Cooperative Compensation
   • If your listing agreement specifies cooperative compensation (e.g., "6% split as 3% and 3%") This is generally an instance where you have an existing listing agreement from pre-settlement
     • Do not execute an offer that includes commission in paragraph 12a1b.
       • Doing so could result in both the seller and you paying buyer agent commission (e.g., a total of 6% to the buyer agent).
     • Instead, use the TXR-2402 form and fill out page 10 of the contract.

Important Notes

• Old Commission Addenda
  • While both ABOR/Unlock and TXR commission addenda are still valid, they are no longer necessary under the new guidelines. Simplify by using the updated 1-4 Family Contract.
• Check Your Work
  • Mistakes with commission clauses are high consequence and can lead to major issues for sellers and agents.
  • During this transition to new forms, always get a second set of eyes from your ASM or a colleague if needed.
• Avoiding Double Commission 
  • It’s important to make sure that contracts only contain the appropriate commission commitment for sellers. 
  • Use only Paragraph 12a1b OR Pg. 10 and the Compensation Agreement Between Brokers to ensure commissions are notated accurately

Summary of Changes

• For BUYERS, use paragraph 12a1b to negotiate BAC unless the listing agent specifies a Co-Broker agreement.
• For LISTINGS, only use paragraph 12a1b when you have an open-ended BAC agreement.
• Cross-reference the contract and your listing agreement to avoid duplicate commission payments.

Adapting to these updates ensures compliance and helps avoid costly mistakes. When in doubt, consult your ASM team or a colleague for guidance.

Summary of Changes to TREC Contract Forms (Effective January 3, 2025)

The Texas Real Estate Commission (TREC) has implemented several updates to its contract forms, effective January 3, 2025. Important changes include:

• Paragraph 4: The term "geothermal" has been added to the definition of Natural Resource Leases, aligning with a 2023 law recognizing property owners' rights to geothermal energy beneath their land.

  
  
  

• Paragraph 6C(1): Sellers can now provide a T-47.1 Declaration (which does not require notarization) instead of the T-47 Affidavit when furnishing an existing survey, in line with updated Texas Department of Insurance rules.

  
  
  

• Paragraph 6C(2): The language has been revised to state "Buyer may obtain a new survey" instead of "Buyer shall obtain a new survey." Additionally, if the buyer fails to obtain the survey, they do not have the right to terminate the contract under Paragraph 2B of the Third Party Financing Addendum due to the absence of the survey.

  
  
  
• Paragraph 6E(11): A new requirement mandates sellers to provide buyers with copies of any mold remediation certificates issued within the five years preceding the sale, as per Texas law. 

• Paragraph 6E(12): This section now includes specific examples of required notices and cautions that failure to provide them may grant buyers certain remedies, such as contract termination.

  
  
  
• Paragraph 12A:
  • 12A(1)(a) and 12A(2): Clarifies that each party is responsible for the brokerage fees they have agreed to pay.
  • 12A(1)(b): Allows for a specified seller contribution to the buyer’s brokerage fees.
  • 12A(1)(c): Separately addresses other seller contributions, removing previous limitations on the types of fees that could be paid and the order of payment. 

• Paragraph 20: The title has been changed from "Federal Tax Requirements" to "Federal Requirements." In the Farm and Ranch Contract, a new Paragraph 20B provides information about obligations related to the federal Agriculture Foreign Investment Disclosure Act.

  
  
  

• Broker Information Section: The compensation disclosure now includes checkboxes to indicate the fee as a percentage or dollar amount, enhancing clarity.

  
  
  
• Third Party Financing Addendum:
  • Paragraph 2A: Requires both a notice of termination and a copy of the lender’s written statement for Buyer Approval terminations, ensuring proper documentation.
  • Paragraph 2B: Modifies termination notice timing to align with other contract provisions, reducing confusion. 

These revisions are intended to enhance clarity, maintain compliance with recent legislative changes, and improve the transaction process. For detailed information and access to the updated forms, please visit TREC's website.