Response: Similar disclosures are in the proposed text of relevant contracts wherein the issue may arise. In addition, a disclosure regarding flood plains is in the sellers disclosure notice.

Comment: One commenter requested adding a parenthetical to paragraph 4A to clarify that the amount does not include mortgage insurance and funding fees.

Response: The parenthetical is already in paragraph 3B of the relevant contracts and the Third Party Financing Condition Addendum. The amount in 4A should be the same amount indicated in 3B and the Third Party Financing Condition Addendum; therefore it is redundant to include the parenthetical again.

Comment: One commenter suggested adding a space or check box to Paragraph 6C to all the contracts to provide for situations in which no survey is required similar to the proposed text in the Farm and Ranch Contract.

Response: Few residential property sales in Texas are closed where no survey is required. The Commission believes that the benefits of leaving out the "no survey" option in paragraph 6 significantly outweigh the risks to the public where the buyer or seller has an option to choose that no survey is provided in a typical residential property transaction. A seller does have the option, however, to provide an existing survey if the title company or buyer's lender approve. The Commission believes that the public interest is best served by the proposed text of the forms without the suggested change.

Comment: Three commenters stated that they liked the changes, one especially liked the changes to paragraph 12 concerning the MIP and PMI.

Response: The Commission appreciates the comments in support of the proposed changes.

Comment: Two commenters requested that the Commission stop making changes to the forms and stated that the proposed changes are unnecessary.

Response: The Commission appreciates the input; however, due to constant changes in industry practice and law, updates to the contract forms are necessary and for the benefit of the public.

Comment: One commenter suggested that paragraph 7.G. in the new home contracts should be filled in with the minimum FTC required insulation standards.

Response: The Commission determined that the proposed change was unnecessary and the public interest was best served by the proposed text of the forms without the suggested change.

Comment: One commenter asked that the Commission change "shall" to "will" in paragraph 5 of the contract forms.

Response: The Commission determined that the suggested change was a stylistic preference and therefore unnecessary.

Comment: One commenter requested that paragraph 23 of all the contract forms specify that the option fee is an amount in addition to the earnest money.

Response: The Commission determined that the proposed change was unnecessary as it is sufficiently clear in paragraph 23 that the option fee is to be paid to the seller and is separate from the earnest money.

Comment: One commenter suggested changing all the contract forms to prohibit buyers from bargaining for several different properties at the same time by using the option fee and time period because it is unfair to sellers.

Response: The Commission determined that the public interest was best served by the text of the forms without the suggested change as it would eliminate protections for the parties established in the text as proposed.

Comment: One commenter suggested changing paragraph 6.A.(8) (paragraph 6.A.(6) in the Farm and Ranch Contract) of the contract forms to include check boxes for a buyer to accept or decline the option to amend the exceptions in the Title Policy to read, "shortages in area".

Response: The Commission believes that the public interest is best served by the proposed text without the suggested change. It is unnecessary to add additional check boxes for the buyer to indicate a choice as it clear in the current language of the provision that the buyer, at the buyer's expense, may have the exception amended to read "shortages in area."

Comment: One commenter requested that the appraisal fee should be treated differently from other costs in paragraph 12 because it is a significant "upfront" cost and deserves separate treatment.

Response: The Commission appreciates the input but it is unclear what changes the commenter is suggesting. The Commission believes that the public interest is best served by the proposed text of paragraph 12 without additional changes except as noted above.

Comment: One commenter suggested changing the dates in paragraph 6.C.(1)&(2) to be the same as the last sentence of paragraph 6.C.(3) which sets the time in which to provide a new survey if the title company or buyer's lender does not approve an existing survey to a period of time prior to the closing date.

Response: All three deadlines for providing a survey in paragraph 6, whether at buyer's expense, at seller's expense, or an existing survey, run from the effective date of the contract. The only survey date that is tied to the closing date is the time in which to provide a new survey if the title company or buyer's lender does not approve an existing survey. The Commission determined that it is more consistent to leave the text as proposed.

Comment: One commenter proposed adding a provision to the termination option in paragraph 23 to permit the Buyer to provide the option fee within 2 days of the effective date of the contract.

Response: The current option paragraph requires that the buyer pay the option fee on or prior to the effective date of the contract. The Commission determined that the public interest is best served by the text of paragraph 23 without the suggested change as it would affect protections for the parties already established in the text as proposed.

Comment: Three commenters suggested adding an automatic 15 day extension of contract to provide for satisfaction of lender's closing requirements.

Response: The amendment form can be used for the parties to extend the closing date for any reason, or the parties can agree to provide for an automatic extension for lender's closing requirements in paragraph 11 of the contracts. The automatic 15 day extension was removed from the current residential contract, TREC. No. 20-5, last year when the Broker Lawyer Committee proposed that the Commission adopt the change as one of several to the residential contract. At that time, the Commission considered similar suggestions to leave the extension in the forms and ultimately decided to remove the automatic extension. The Commission has determined at this time that the public interest is best served by the proposed text without the suggested change as an extension of the closing date to satisfy lender's closing requirements can be made by agreement of the parties.

Comment: One commenter suggested that the Commission delete paragraph 12B from the forms and place "mortgage insurance premium or loan funding fee" under Buyer's Expenses in paragraph 12A(2).

Response: MIP and PMI are defined terms in paragraph 12.B. and then referenced in the Third Party Financing Addendum. The terms would need to be defined in paragraph 12 which would be the same as the proposed text of paragraph 12.B.

Comment: Regarding paragraph 12.A(1)(b) in the TREC form No. 20-6, two commenters requested that the Commission consider limiting the dollar amount in this blank to include only fees charged by the lender which the Buyer may not pay, and adding another paragraph (c) which would include a blank for any other expenses the Buyer is asking the Seller to pay.

Response: The commenter's proposed text achieves the same purpose as the text proposed by the Commission but unnecessarily makes the forms longer.

Comment: One commenter requested that the forms be changed to add a paragraph that addresses whether the property will be owner occupied. Whether an owner occupies a property may affect financing because the buyer may not be approved for a loan at the interest rate indicated on the financing addendum.

Response: While the Commission understands the concerns raised by the suggestion, it determined that the public interest was best served by the text of the forms without the suggested change as it would affect protections for the parties established in the text as proposed.

Comment: A commenter suggested modifying the escrow agreement in all of the contract forms to include instructions to the title companies that will affect the immediate release of all earnest money in the event that the buyer terminates per the termination option.

Response: All the contract forms have been modified to provide for a refund of the earnest money to Buyer in any instance where the buyer has a right to terminate under the contract. This proposed text should address the concerns raised by this commenter to provide for quick refund of earnest money to the Buyer in appropriate instances.

Comment: One commenter asked that paragraph 7 (A) clarify that 1) access to the property is only during the Option Period or during a defined period if there is no Option; and, 2) it should read "Buyer's Agents or Buyers accompanied by their Buyer's Agent".

Response: The Commission reviewed the suggestion and determined that the public interest was best served by the text of the forms without the proposed change as it would alter protections for the parties established in the text as proposed.

Comment: On TREC No. 24-5, one commenter recommended that Paragraph 2 have the same format as TREC No. 20-6 Paragraph 2(B-D) to include a separate paragraph for Improvements; Accessories; and Exclusions.

Response: The Commission appreciates the suggestion, but has determined that the recommended change is not necessary at this time.

Comment: On TREC No. 9-5, paragraph. 6.E.(5), and TREC No. 25-4, paragraph 6.G.(4), one commenter recommended that the last sentence include the following to be added to the end of the sentence: "and/or possible restrictions on the use of the property" in bold print.

Response: The language in both contract forms' disclosures is quoted verbatim from Property Code §5.011 which requires the disclosure. The Commission determined that the disclosure should track the language of the statutory provision requiring the disclosure.

Comment: One commenter suggested adding a contingency requiring the buyer to deliver a written waiver of the financing contingency on or before the financing contingency deadline in the Third Party Financing Condition Addendum. The commenter also suggests the creation of a new form containing the text of the buyer's written waiver.

Response: The contracts already contain a contingency in paragraph 4.A.(2) that is similar to the suggestion. A buyer can choose to enter into the contract without the contract being subject to buyer being approved for financing. If the buyer cannot get financing approval, the buyer will be in default. However, in all cases, if the property does not satisfy the lenders' underwriting requirements for the loan, the contract will terminate and the earnest money refunded to the buyer. Furthermore, the Third Party Financing Condition Addendum, which currently contains the financing approval deadline, is not under review at this time, and the creation of a new form for the written waiver is not feasible at this step of the rulemaking process adopting the revised forms.

Adoption of these amendments is necessary for TREC to update the contract forms used by Texas real estate licensees when negotiating the sale of real estate and to modify the forms to reflect changes in the real estate market and the law. The actions also are necessary for TREC to comply with the mandate in Texas Civil Statutes, Article 6573a, §16, for the Broker-Lawyer Committee to revise forms to expedite real estate transactions and reduce controversies to a minimum while safeguarding the interests of the principals to the transaction.

The amendments are adopted under Texas Civil Statutes, Article 6573a, §5(h), which authorizes the Texas Real Estate Commission to make and enforce all rules and regulations necessary for the performance of its duties, to establish standards of conduct and ethics for its licensees in keeping with the purposed and intent of the Act or to insure compliance with the provisions of the Act; and Texas Civil Statutes, Article 6573a, §16(e), which authorizes the commission to adopt rules and regulations requiring real estate brokers and salesperson to use contract forms which have been prepared by the Texas Real Estate Broker-Lawyer Committee and promulgated by the commission.