An Open Letter to the Texas Real Estate Commission

Public Comments Period on Proposed Residential Contract Changes

Dear TREC General Counsel & Broker-Lawyer Committee:

I write to express criticism of the proposed changes that don't go far enough in protecting consumer interests. Following are my specific comments to the Committee. 

18. B. EXPENSES:  The escrow officer should not have a right to demand release of liability from all parties. The contract is clear about the terms under which the escrow officer is authorized to release the money, therefore no additional hang-ups is reasonable or fair to the other parties involved. If litigation against an escrow officer ensues, that litigation given the clarity of the contract should be adjudicated on a reasonable and normal basis of contract law and precedent in normal civil due process. A competent attorney can advise clients about the merits of any proposed action. It is unfair to the other parties to allow an escrow officer or company to require an additional release of liability. It is unreasonable to give them that right in the promulgated contract.

18.B/C DEMAND:  Again, no escrow officer or company should be allowed – they should be forbidden – to demand a Release of Earnest Money with release of liability under a properly executed contract with a valid Option Period under Paragraph 23 and when proper notice is given to the parties as per the contract. An escrow company should not be given a right to require anything further than what the contract calls for. The reasoning is the same as above, but is magnified by the urgency of the buyers receiving their Earnest Money refund after a proper exercising of their termination right (for which they pay) – because most buyers will need that cash to put down as Earnest Money on their next contract. A requirement for an REM (it’s really REL – Release of Liability) by an escrow officer is inherently unfair to the Buyer who is exercising a clear right granted them in the contract, and allowing escrow companies to require a release of liability both undermines and weakens that right.

Bottom line is why in the world should we give a right to escrow companies to release themselves of liability under our promulgated contracts if our contracts are clear enough to promulgate and use across the entire State of Texas by licensed agents and brokers? If the contract is not that solid, then the Committee should reexamine it further. Furthermore, I recommend that TREC work with TDI especially on the 18. DEMAND terms under a Paragraph 23 TERMINATION OPTION to issue a ruling from TDI that no escrow company can require a release of liability before issuing a refund of EM under the circumstances I lay out above. It is unfair to Texas consumers and needlessly causes them delay and all parties additional time and frustration – completely unnecessarily.

TIMELINE: 45 days is unreasonably long for a house to be tied up by a buyer, many times acting on bad faith, and that is all too common. If a buyer is serious about taking action, 10 days is more than ample time for a reasonable person to consult an attorney about making a demand for specific performance. 45 days is entirely unreasonable. Furthermore, 15 days for a party to issue a counter-demand under Paragraph 18 is also exceedingly unreasonable. Once a party is given proper notice under the terms of the contract, any reasonable party contemplating a counter-demand can speak with an attorney within 5 days and give simple notice to the escrow officer. These extended time frames are unfair and unreasonable for all parties, and as we all know too well, they give all probable incentive for parties to act in bad faith. The performance requirements should be far stricter.

While the changes proposed are an improvement in these matters, they fall extraordinarily short in accomplishing the goal of improving consumer protections in the State of Texas, which should lead the nation in such protections.

I appreciate your consideration of my comments and you are welcome to contact me and to make this comments memo a part of the public record if you wish.

Sincerely,

Nick Will,