This is a general question arising out of deal we have going.

I'm representing seller and we are selling unimproved property, but this would pertain to any real estate transaction. Buyer's agent want's seller to forfeit remedy on paragraph 15 relating to specific performance and other legal remedies leaving the EM as sole remedy in the event the buyer defaults after option period. This was non-negotiable for them. We presented that either both parties forfeit this remedy or it stays for both parties. They lost the deal and we executed with the offer we had despite them having a better overall offer aside from this issue.

First question, I'm pretty sure you can't alter a TREC promulgated form in that manner? It would need to be drafted by an attorney.
Other question is, why would a buyer think a seller would ever agree to this? Am I missing something?

I can understand a buyer saying if they forfeit this their only restitution is having their EM returned back, but the seller at least gets to keep the EM if buyer defaults. But what if our damages are above EM? We would be foregoing our ability to pursue damages above that amount if the buyer defaults.

I know specific performance is mostly a non-issue and the likelihood for any of legal issues arising is low, but its really the notion that a buyer would ever think a seller would be ok eliminating all eliminating all legal remedies yet the buyer retains theirs would be acceptable that is throwing me off.

Just really strange the deal ended that way and never had that happen before. Wanted to hear your thoughts.

Buyer and seller can alter the TREC contract as much as they like. I would suggest that this is not advisable without getting a real estate attorney to discuss the implications of doing so, but theoretically nothing preventing them from making changes if all parties agree. What (I think) you are referring to is that the agents involved cannot alter the contract, unless they also happen to be attorneys.

As an aside, I would assume most brokers would get heartburn in this situation so the "Franken-contract" might not make it through internal compliance, but that's a different story.

Specific performance is probably a silly thing for the buyer to get hung up on, but I'm guessing some lawyer (or wannabe lawyer) got in their head about it.

My understanding is, courts "typically" agree that the earnest money is a sufficient remedy in the case of default and I've never heard of a case where a judge ordered a buyer to purchase a home if they don't want to.

Furthermore, unless you do want to get lawyers involved, it's a damn PITA to get earnest money from a buyer if they don't want to play nice. Title company sure as heck ain't going to get involved.

Bob_Ag: Striking the "(a) enforce specific performance, seek such other relief as may be provided by law, or both" section is actually quite common when a party to the contract has consulted with an attorney before executing the offer/acceptance. It provides certainty to that potential buyer that litigation over an alleged breach likely won't be an issue. If the closing date is reasonable and the earnest money is an appropriate amount in the first place, the Seller really shouldn't have much of an issue on this item. The seller could ask for more earnest money in order to agree to strike the specific performance provision. As for the seller not getting the similar provision on their side struck, most of the time after a breach of the agreement (post-option period), the seller simply wants to get the property back on the market and recover the earnest money as litigation regarding title/possession of the property would make selling the property quite difficult. I regularly advise this when representing a buyer in a residential transaction and attempt to exclude such a provision to a party that I represent in a commercial transaction.

A realtor who isn't an attorney can't really give advice to strike this provision or actually strike the provision as it is altering an approved TREC form and which could be the unauthorized practice of law. A party to the transaction (seller/buyer) can strike through any provision and initial the change and it would be ok.

I haven't had an issue obtaining the return or turn over of earnest money if the provisions of the agreement are clear.

And here's the lawyer that got in their head!

In a sellers market, chopping up a contract to remove things like specific performance is silly. Will raise red flags with seller (as it did here) for little to no benefit. I get lawyers are paid to think worst case, but leave this silliness for commercial deals.

As far as earnest money, I would hope you would have no problem getting the terms enforced. My point is that most people don't realize that they will potentially need an attorney to get back earnest money in clear default situation. Many times, it's just not worth it.

Perfect, many thanks to both of you.

That's exactly what we discussed in the event this happens next time is that we will negotiate the earnest money differently if the buyer wants this provision striked for the seller.

It's interesting the Texas Realtor commercial contract for unimproved property has a checkbox for this remedy for the seller only.

These are large transactions with months of feasibility and closing involved and I think our biggest hang up is if the buyer walks the day before closing, who knows if the earnest money is sufficient as sole remedy. It likely is which is the point of the earnest money, but would hate to not have that remedy if it was needed for a seller client.

I would not recommend using the TREC Commercial contracts. Better to have an attorney draft those

Diggity said:

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I would not recommend using the TREC Commercial contracts. Better to have an attorney draft those

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Definitely.