Starting February 1, 2021, Texas Real Estate Agents have the option, but not the requirement, to use the new TREC 20-15 1-4 Family Residential Contract (Resale), which contains new provisions for the Title Insurance Agent to receipt and disburse the Option Fee. This contract form becomes mandatory for use by all Texas Real Estate Agents after April 1, 2021.
Changes from the prior 20-14 form contained in the new 20-15 contract form include –
Deleting paragraph 23 dealing with the Option Fee and combining Option Fee provisions into paragraph 5 with the Earnest Money Provisions.
Both the Option Fee and the Earnest Money are to be delivered to the Title Insurance Agent, referred to as escrow agent in the Contract form.
The Option Fee and Earnest Money can be delivered in a single check, rather than in separate checks as required previously.
The new Contract form now provides for a separate receipt of the Option Fee and the Earnest Money, with the receipt of the Option Fee being subtly changed from being signed by the Seller’s Broker to requiring the signature of the escrow agent. Make sure you receive both.
Under paragraph 5.A(3), “The amount(s) escrow agent receives under this paragraph shall be applied first to the Option Fee then to earnest money, and then to the additional earnest money.”
For example: If the contract provides for payment of $1,000 earnest money and a $100 option fee, and the Buyer delivers only $1,000 to the title agency, you will sign the contract receipt to evidence delivery of the $100 Option Fee, but you will NOT sign the receipt for the Earnest Money because not all of it has been received, and you will provide notice to the Buyer they are short $100 in earnest money.
Whereas the prior contract form gave the contracting parties the option of whether to credit the Option Fee to the price of the property at closing, the new contract form makes it mandatory that the Option Fee be credited to the sales price at closing. You will note that credit on the Settlement Statement accordingly.
The Option Fee remains non-refundable whether or not the transaction closes.
If you have any questions regarding this bulletin, feel free to call Martin Garcia at Magnolia Title at 817-768-3355, e-mail him at Mgarcia@TitleTX.com, or visit www.magnoliatitleinsurance.com/fort-worth/.
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