TREC 20-19 One to Four Family Residential Contract Explained

The exam does not ask a sales agent to draft a contract or give legal advice. It tests whether you can read a fact pattern, recognize the right form, locate the paragraph that controls the issue, choose a required addendum, and avoid unauthorized practice of law.

This guide follows TREC No. 20-19, effective July 1, 2026. Study the job of each paragraph first. Then learn the deadlines, addenda, and traps that attach to it.

What Changed in TREC Form 20-19 for 2026

Form 20-19 became effective July 1, 2026. These are the changes most useful for exam recognition. They come from TREC's current form, its redline, and its rule-adoption summary.

TREC identifies Form 20-19 as the current and most frequently used resale contract. Pearson VUE's Texas Sales Agent State Law outline, effective January 1, 2026, assigns eight scored items to the full Contracts area. That eight-item weight covers promulgated forms and addenda, the Statute of Frauds, and seller disclosure requirements. It does not mean eight questions will come only from this one form.

What the Exam Is Testing About TREC Form 20-19

Paragraph-by-Paragraph Cheat Sheet

Not sure which paragraph you need? Use this table to match a question clue or fact pattern with the controlling contract paragraph, deadline, or form issue.

When This Contract Is Used

TREC describes this as its most frequently used contract form. It is for the resale of a single-family home, duplex, triplex, or fourplex. A condominium, builder new home, farm and ranch property, or commercial property points somewhere else.

That gives you the exam recognition rule:

Candidate memory hook:

One to four means the number of residential units. It does not mean the number of buyers, lots, or years in a lease.

Test the Recognition Rule in 60 Seconds

Do these before reading the detailed walkthrough. The point is not to memorize sentences from the form. It is to connect a fact to the right form, paragraph, or professional boundary.

Complete Paragraph Reference

The quick review ends here. Continue when you need the full paragraph-by-paragraph explanation, or use the numbered shortcut above to open a specific paragraph. You do not need to read every section in one sitting.

Paragraph 1: Parties

Paragraph 1 identifies the seller and buyer.

That sounds simple, but exam questions can test whether the license holder understands that the parties must be correctly named. A contract involving an estate, trust, business entity, married owner, or entity buyer may require more care than a casual nickname.

An LLC, trust, estate, inherited property, or uncertain signing authority turns a simple name blank into a party-identity issue. The license holder should not guess at legal capacity or authority.

Common trap: treating a nickname, trade name, or uncertain signer as good enough. Rights and obligations run to the parties actually named in the contract.

Paragraph 2: Property

Paragraph 2 defines the property being sold.

This is one of the most important exam paragraphs because it separates real property, improvements, accessories, exclusions, and reservations.

Paragraph 2A: Land

The land section identifies the legal or descriptive property being sold. It usually includes lot, block, addition, city, county, address, ZIP code, or an attached exhibit.

Exam point:

The address helps identify the property, but legal descriptions matter in real transactions. If a fact pattern raises uncertainty about boundaries or legal description, the license holder should not casually invent a description.

Paragraph 2B: Improvements

Improvements include the house, garage, fixtures, and built-in or permanently installed items attached to the real property.

Built-in ovens, ceiling fans, attached mailboxes, installed security equipment, landscaping, and permanently installed generators are improvement clues. Form 20-19 expressly added generators to Paragraph 2B.

Paragraph 2C: Accessories

Accessories are related items that may not be fixtures in the same way but are included by the form.

Accessories include listed related items such as door and mailbox keys, garage-door controls, above-ground pool equipment, curtains, and rods. Read the printed list and any exclusions instead of deciding only by whether an item is attached.

The current form also addresses transferable smart-control rights for certain improvements and accessories. For exam purposes, this connects Paragraph 2 to Paragraph 10 on smart devices.

Paragraph 2D: Exclusions

Exclusions are items the seller keeps and removes before possession is delivered.

Exam clue:

If the seller wants to keep an item that would otherwise be included, it belongs in the exclusions area or another proper written agreement. Do not rely on a casual conversation.

Paragraph 2E: Reservations

Reservations deal with interests the seller keeps, such as oil, gas, other minerals, water, timber, or other interests, according to an attached addendum.

Exam clue:

If the seller reserves minerals, the Addendum for Reservation of Oil, Gas, and Other Minerals is the recognition answer. The sales agent should not draft custom mineral-reservation language.

Fast distinction: a retained chandelier is an exclusion issue, a refrigerator may call for the Non-Realty Items Addendum, leased solar panels point to a fixture lease, and a mineral reservation points to the appropriate addendum. An uncertain legal description calls for broker or attorney guidance, not improvisation.

Paragraph 3: Sales Price

Paragraph 3 breaks the sales price into the cash portion, financing, and total sales price.

For exam study, understand the math and the addendum triggers.

Paragraph 3A: Cash Portion

The cash portion is the amount payable by the buyer at closing, separate from financing described in attached financing addenda.

Exam trap:

Cash portion does not mean the buyer is bringing a suitcase of cash. It means the part of the sales price not described as financing in Paragraph 3B.

Paragraph 3B: Financing

Paragraph 3B points you to the attached financing addendum.

Paragraph 3C: Total Sales Price

Paragraph 3C is the sum of the cash portion and financing.

Paragraph 3 Exam Trap

Do not confuse sales price with loan amount, down payment, earnest money, or option fee.

The sales price is Paragraph 3A plus Paragraph 3B. Earnest money is a deposit handled through escrow, and the option fee pays for the Paragraph 5 termination option. Neither is a separate component of the Paragraph 3 sales-price calculation.

Paragraph 4: Leases

Paragraph 4 addresses leases affecting the property.

This paragraph matters because many candidates miss lease issues when the property is being sold.

Residential Leases

If the property is subject to one or more residential leases, the Addendum Regarding Residential Leases is attached.

An existing tenant, lease copies, or transferred security deposits point to the Addendum Regarding Residential Leases.

Fixture Leases

Fixture leases involve attached items that are leased, such as solar panels, propane tanks, water softeners, or security systems.

Leased solar panels, an attached leased propane tank, a leased water softener, or a leased security system point to the Addendum Regarding Fixture Leases.

Natural Resource Leases

Natural resource leases may include oil and gas, mineral, geothermal, water, wind, or other natural resource leases affecting the property.

Exam point:

This is not the same as a seller reserving minerals. Natural resource lease facts can affect title, use, disclosure, and buyer review rights.

Paragraph 4 Exam Trap

Do not confuse an existing tenant with temporary possession. A seller staying after closing or a buyer moving in before closing is a Paragraph 10 issue and calls for the appropriate temporary residential lease.

Paragraph 5: Earnest Money and Termination Option

Paragraph 5 covers earnest money, the option fee, and the termination option. Earnest money is a deposit held by the escrow agent toward buyer performance, while the option fee buys the buyer's unrestricted right to terminate during the option period.

Paragraph 5 is heavily testable because it combines money, deadlines, and termination rights.

The exam loves deadlines. Paragraph 5 gives it plenty.

Earnest Money

Earnest money is delivered to the escrow agent. Under the checked form version, the delivery deadline is within three days after the effective date.

Exam points:

The current form defines a Legal Holiday for this deadline rule. Read the definition in the form instead of assuming every business closure changes a contract deadline.

Option Fee

The option fee is the amount paid for the buyer's unrestricted right to terminate during the option period.

If the transaction closes, the option fee is credited to the sales price. If the buyer terminates under Paragraph 5, the option fee is not refunded, while the earnest money is refunded. Keeping those two outcomes separate prevents one of the most common option-period mistakes.

Exam points:

Earnest Money vs Option Fee

Paragraph 5 Exam Trap

A buyer's option period does not exist just because a buyer wants one. The contract must state the option fee and option period, and the fee must be delivered as required.

Paragraph 6: Title Policy and Survey

Paragraph 6 is long because title and survey problems are common in real estate transactions.

For exam purposes, break it into five buckets:

1. Title policy.
2. Commitment and exception documents.
3. Survey.
4. Objections.
5. Title notices.

Paragraph 6A: Title Policy

The title policy insures the buyer against certain title losses, subject to exclusions and exceptions.

Exam clues:

Paragraph 6B: Commitment

The title commitment and exception documents are furnished after the title company receives the contract.

Exam point:

This creates a deadline and a buyer review issue. If commitment and exception documents are not delivered on time, the form gives consequences and possible termination rights.

Paragraph 6C: Survey

Paragraph 6C gives survey options.

The three basic recognition patterns are:

Exam trap:

If the existing survey is not accepted by the title company or lender, the contract may require a new survey and says who pays depending on the selected option.

Paragraph 6D: Objections

Buyer may object in writing to certain title, survey, or use issues within the required deadline.

Exam clues:

Paragraph 6E: Title Notices

Paragraph 6E contains several statutory and practical notices. For exam purposes, know the recognition clues, not every statute number.

Paragraph 6 Exam Trap

Do not treat title and survey paragraphs as legal advice territory for the agent. The contract itself even advises attorney review for title matters. On the exam, the safe license-holder answer often involves using the right form, explaining informational items, and recommending attorney review where legal effect is involved.

Paragraph 7: Property Condition

Paragraph 7 covers access and inspections, the seller's disclosure notice under Texas Property Code Section 5.008, lead-based paint disclosure for pre-1978 homes, as-is acceptance and repairs, environmental matters, and optional residential service contracts.

Paragraph 7 is a favorite for scenarios because it touches inspections, seller disclosure, lead-based paint, as-is language, repairs, environmental matters, and residential service contracts.

Paragraph 7A: Access, Inspections, and Utilities

Seller permits buyer and buyer's agents access at reasonable times. Buyer may have inspections by TREC-licensed inspectors or others permitted by law. Hydrostatic testing must be separately authorized in writing.

Exam clues:

Paragraph 7B: Seller's Disclosure Notice

Paragraph 7B deals with the seller's disclosure notice under Texas Property Code Section 5.008.

Recognition patterns:

Exam trap:

Seller disclosure is not the same as an inspection report. Seller disclosure is the seller's disclosure of known property condition information. An inspection report is prepared by an inspector.

Paragraph 7C: Lead-Based Paint

Lead-based paint disclosure is required by federal law for residential dwellings constructed before 1978.

Exam clue:

Pre-1978 residential dwelling means lead-based paint addendum and disclosure issue.

Paragraph 7D: Acceptance of Property Condition

Paragraph 7D addresses "as is" and any specific repairs or treatments the seller agrees to complete.

Exam points:

Candidate trap:

Do not write "subject to inspection" as a repair item. That is exactly the kind of vague phrase the form warns against.

Paragraph 7E and 7F: Lender Required Repairs and Completion

Lender-required repairs can matter when the lender requires repairs or treatments before loan approval or closing.

Exam clues:

Paragraph 7G: Environmental Matters

Environmental concerns include wetlands, toxic substances, asbestos, waste, or threatened or endangered species habitat.

Exam clue:

If the buyer is concerned about environmental matters, think Environmental Assessment, Threatened or Endangered Species, and Wetlands Addendum.

Paragraph 7H: Residential Service Contracts

This paragraph addresses optional residential service contracts and seller reimbursement if agreed.

Exam trap:

A residential service contract is optional. Do not treat it as the same thing as insurance, inspection, or a repair warranty from the seller.

Paragraph 7I: Water Rights Disclosure

The current form calls TREC Form 61-0 the Seller's Water Disclosure. Rule 537.68 classifies the form for mandatory use to provide information about groundwater and surface-water rights. Paragraph 7I records whether the buyer received it, gives the seller a delivery period, or permits the no-delivery statement only when all five printed conditions are true.

Exam clue:

If the facts mention a well, a groundwater district, shared-well arrangements, or a surface-water right, identify the Seller's Water Disclosure. Do not treat it as a title policy or an ordinary property-condition inspection.

Paragraph 8: Brokers and Sales Agents

Paragraph 8 focuses on written disclosure when a license holder is a party or acts for certain related people or entities. The prior broker-fee subsection was removed from Form 20-19. Brokerage compensation is addressed in Paragraph 12B and separate written agreements.

Paragraph 8A: License Holder Disclosure

Texas law requires written disclosure when a real estate broker or sales agent is a party to the transaction or acts on behalf of certain related persons or entities.

Expect a written-disclosure question when the license holder is a party, acts for a spouse, parent, or child, acts as trustee or for a qualifying trust beneficiary, or owns more than 10 percent of a business entity involved in the transaction.

Paragraph 9: Closing

Paragraph 9 sets the closing date and explains closing obligations.

Paragraph 9A: Closing Date

Closing occurs on or before the stated date, or within the time stated after title objections are cured or waived, whichever date applies under the paragraph.

If the closing date passes without performance, connect Paragraph 9 to the default remedies in Paragraph 15. If timely title objections are cured late, read the contract's closing-date extension instead of assuming the original date still controls.

Paragraph 9B: At Closing

At closing, seller conveys title by general warranty deed, buyer pays the sales price in good funds, and the parties sign closing documents needed for sale and title policy issuance.

The seller delivers the deed and required closing documents, the buyer pays in good funds, and liens that are not being assumed must be satisfied from the proceeds. Private transfer fees are generally the seller's obligation unless the contract provides otherwise, while POA transfer fees are governed by the POA addendum.

Paragraph 10: Possession

Paragraph 10 is about when the buyer gets possession and what happens with smart devices.

Paragraph 10A: Buyer's Possession

The common possession choice is upon closing and funding. If buyer occupies before closing or seller remains after closing, use the proper written lease. TREC's Buyer's Temporary Residential Lease and Seller's Temporary Residential Lease are each limited to occupancy of no more than 90 days; a longer arrangement requires different legal documentation and attorney guidance.

Possession upon closing and funding is the ordinary selection. A buyer moving in before closing points to the Buyer's Temporary Residential Lease. A seller staying after closing points to the Seller's Temporary Residential Lease. Without a written lease, off-timeline possession creates a tenancy-at-sufferance relationship under the form.

Paragraph 10B: Smart Devices

The seller must provide access information needed for smart devices and remove seller access from personal devices when possession is delivered.

Smart locks, thermostats, cameras, and other connected devices create two duties at possession: provide the buyer with the access information and remove the seller's access from personal devices.

Paragraph 11: Special Provisions

Paragraph 11 is intended for additional informational items. TREC Rule 537.11 prohibits brokers and sales agents from drafting or recommending language that changes legal rights, obligations, or remedies, so agent-created clauses, contingencies, and remedies do not belong here.

Paragraph 11 is one of the most important exam paragraphs because it is the classic unauthorized practice of law trap.

The rule does contain one narrow recording provision. A license holder may make a conspicuous addition or deletion when a principal specifically gives that instruction in writing. The license holder still may not create the wording, recommend it, or advise the principal about its legal effect.

What Can Go in Special Provisions?

Informational items.

Examples that may be informational:

What Should Not Go in Special Provisions?

Legal drafting.

Examples of dangerous items:

Paragraph 11 Exam Trap

If a question says the buyer asks the agent to "write a clause," the best answer is usually not "put it in Special Provisions." The safer answer is to use the correct TREC addendum if one exists or advise the party to consult an attorney.

Paragraph 12: Settlement and Other Expenses

Paragraph 12 allocates settlement expenses and addresses brokerage compensation. Form 20-19 reorganized this paragraph and added Paragraph 12B.

For the exam, know the expense categories, negotiated contributions, and governmental loan limitation.

Paragraph 12A: Settlement Expenses

Seller expenses include items such as releases of existing liens, preparation of the deed, and other seller charges stated by the contract. Buyer expenses include loan, appraisal, recording, prepaid, and other buyer charges. The current form also lets the parties select whether Seller or Buyer pays the owner's title policy in Paragraph 6A, so do not assign that cost from habit.

Paragraph 12A includes a negotiated amount one party may contribute toward the other party's expenses. The completed contract controls the amount and purpose.

Exam clue:

If the fact pattern asks who pays a settlement cost, look for Paragraph 12 and any blank the parties completed.

Paragraph 12B: Brokerage Compensation

Brokerage compensation is negotiable and comes from separate written agreements. Paragraph 12B provides contract selections for a Seller or Buyer payment toward the other party's brokerage fees. It does not create a fixed commission or make compensation automatic.

Exam clue:

If a question asks who pays a broker, use the written agreements and completed contract facts. Do not infer a customary percentage or automatic payer.

Government Loan Expense Limits

Paragraph 12C addresses a governmental loan program that prohibits the buyer from paying particular charges or fees. In that situation, any seller concession stated in Paragraph 12A(1)(b) is applied first to the prohibited buyer expenses and then to other buyer expenses, but not to brokerage compensation or a Paragraph 12B contribution.

Exam trap:

Do not assume the parties can shift every cost however they want when a governmental loan program prohibits a buyer charge. Read the completed contract and the applicable loan-program rule.

Paragraph 13: Prorations

Paragraph 13 covers prorations through closing.

Prorations are a math and concept favorite.

Current-year taxes, interest, rents, and regular periodic maintenance fees, assessments, and dues are prorated through the closing date.

Tax Proration Trap

Taxes for the current year may be estimated at closing. If actual taxes later differ, the parties adjust after statements become available.

Exam clue:

If a question asks why a closing number later changes, look for tax-proration adjustment.

Paragraph 14: Casualty Loss

Paragraph 14 handles damage or destruction after the effective date.

This is not the same as an inspection issue discovered before the contract. It is about casualty loss after the contract is already effective.

Buyer Options If Seller Cannot Restore

If the seller cannot restore the property by closing because of factors beyond the seller's control, the buyer may terminate for an earnest-money refund, extend performance for up to 15 days, or accept the damaged property with an insurance-proceeds assignment if the carrier permits it and a credit for the deductible.

Paragraph 14 Exam Trap

Do not confuse casualty loss with repair negotiations under Paragraph 7. Paragraph 14 is about fire or other casualty after the effective date.

Paragraph 15: Default

Paragraph 15 sets default remedies. If buyer defaults, seller may generally seek specific performance or other relief, or terminate and keep earnest money as liquidated damages. If seller defaults, buyer may generally seek specific performance or other relief, or terminate and receive the earnest money.

Paragraph 15 gives remedies when a party fails to comply.

Buyer Default

If buyer fails to comply, seller may generally pursue specific performance or other legal relief, or terminate and receive earnest money as liquidated damages, depending on the contract and facts.

Seller Default

If seller fails to comply, buyer may generally pursue specific performance or other legal relief, or terminate and receive the earnest money.

Paragraph 15 Exam Trap

Do not decide who wins a lawsuit. The exam usually asks which paragraph applies, what remedy is described, or whether a license holder should give legal advice. The license holder should not predict legal outcome.

Paragraphs 16 and 17: Mediation and Attorney's Fees

These paragraphs are short but useful.

Paragraph 16: Mediation

Texas policy encourages dispute resolution through mediation. Contract disputes not resolved informally are submitted to a mutually acceptable mediation service or provider, while the paragraph does not prevent certain court relief.

Exam clue:

If a buyer and seller are fighting but have not resolved the dispute informally, mediation may be the next contract concept.

Paragraph 17: Attorney's Fees

The prevailing party in a legal proceeding related to the contract may recover reasonable attorney's fees and costs.

Exam clue:

Attorney's fees are not the same as broker fees. Brokerage compensation is handled by separate written agreements and the selections in Paragraph 12B.

Paragraph 18: Escrow

Paragraph 18 describes the escrow agent's role and earnest-money release mechanics.

Escrow Agent Role

The escrow agent is not a party to the contract and does not decide the merits of buyer and seller disputes.

Exam clue:

If buyer and seller disagree over earnest money, the escrow agent generally needs proper releases, demand procedure, or other lawful authority before disbursement.

Demand Procedure

If the contract terminates, either party or the escrow agent may send a release. If a party refuses to sign, a party may make a written demand for the earnest money. When only one party makes the demand, the escrow agent sends a copy to the other party. If the escrow agent receives no written objection within 15 days, the form permits disbursement to the demanding party, less authorized unpaid expenses.

Wrongful Refusal

Paragraph 18 states that a party who wrongfully fails or refuses to sign an acceptable release within seven days after receiving the request can be liable for damages, the earnest money, reasonable attorney's fees, and costs of suit.

Paragraph 18 Exam Trap

Do not assume the broker personally decides who gets the earnest money. Earnest money disputes follow contract, escrow, and legal procedures.

Paragraphs 19 and 20: Representations and Governmental Requirements

Paragraph 19: Representations

Paragraph 19 says contract covenants, representations, and warranties survive closing. It also says that if a seller representation is untrue on the closing date, seller is in default.

It also permits the seller to continue showing and receiving, negotiating, and accepting backup offers unless a written agreement expressly prohibits it.

Exam clue:

Backup offers are not automatically forbidden just because there is a contract. If the seller accepts a backup contract, the Addendum for "Back-Up" Contract becomes the recognition form.

Paragraph 20: Governmental Requirements

Paragraph 20 addresses withholding when the seller is a foreign person, currency-reporting rules, and other governmental reporting requirements. The current form requires the parties to promptly provide statements, documents, and information requested by the escrow agent for required government reporting.

Exam clue:

FIRPTA-style withholding is a federal requirement issue. License holders should not provide tax advice about it.

Paragraphs 21, 22, and 23: Notices, Addenda, and Attorney Review

Paragraph 21: Notices

Paragraph 21 states that notices must be in writing and identifies acceptable delivery methods and contact details for the parties and their agents. Form 20-19 clarifies that a notice is effective when sent to the party or that party's agent by an authorized method.

An oral termination, late option notice, wrong recipient, or unauthorized delivery method points to Paragraph 21 plus the paragraph that created the deadline. The current form recognizes mail, hand delivery, overnight courier, and electronic transmission to the party or the party's agent.

Paragraph 22: Agreement of Parties and Addenda

Paragraph 22 lists addenda and notices that may be part of the contract and says the contract contains the entire agreement of the parties and can only be changed by written agreement. Form 20-19 organizes the list into Financial, Leases, Additional Tests and Reports, Statutory Disclosures and Notices, and Other.

Common addenda listed include financing, seller financing, POA, temporary leases, loan assumption, sale of other property by buyer, mineral reservation, backup contract, coastal area, hydrostatic testing, appraisal termination, environmental, short sale, lead-based paint, propane gas, residential leases, fixture leases, improvement district assessment, Section 1031 exchange, and other listed addenda.

Exam recognition:

Paragraph 23: Consult an Attorney Before Signing

Paragraph 23 is a bright-line exam paragraph.

TREC rules prohibit real estate brokers and sales agents from giving legal advice. The form tells parties to read the contract carefully and consult an attorney before signing.

Exam clue:

When a party asks what a paragraph legally means, whether a clause protects them, how to draft a custom remedy, or whether they should waive a right, the agent should not give legal advice.

Broker Information and Receipt Sections

After the main contract paragraphs, the form includes execution, broker information, and receipt sections.

Execution and Effective Date

The effective date is the date final acceptance is communicated after the final writing has been signed and unequivocally accepted. The broker fills in that date; it is not necessarily the date written beside the last signature.

Exam importance:

Many deadlines run from the effective date. Earnest money, option fee, additional earnest money, seller disclosure timing, title commitment timing, survey timing, and objection deadlines can all depend on dates.

Broker Information

The broker information section identifies broker firms, representation roles, associates, supervisors, licenses, contact information, and team names.

Exam connections:

Receipt Sections

The receipt sections acknowledge contract receipt, earnest money receipt, option fee receipt, and additional earnest money receipt.

Exam trap:

Receipt of the contract is not the same as receipt of earnest money or option fee. The exam may separate those deadlines and acknowledgments.

Worked Examples: TREC Form 20-19

These original examples show the decision the exam is likely to test. They are not copied questions and are not official Pearson VUE items.

Scenario 1: Existing Home With Bank Financing

A buyer contracts to purchase an existing single-family home. The buyer will obtain a conventional mortgage from a lender.

Best exam recognition: One to Four Family Residential Contract plus Third Party Financing Addendum.

Why: Existing single-family resale points to the base contract. Lender financing points to third-party financing.

Scenario 2: Condo Unit

A buyer is purchasing a resale condominium unit. The agent prepares the One to Four Family Residential Contract because the property is residential.

Best exam recognition: Wrong base contract.

Why: TREC states the One to Four Family Residential Contract is not for condominium transactions. Use the Residential Condominium Contract for a resale condo.

Scenario 3: Buyer Misses the Option Fee Deadline

The contract states an option fee and option period, but the buyer does not deliver the option fee within the time required.

Best exam recognition: Buyer does not have the unrestricted termination right under Paragraph 5.

Why: The option right depends on the stated fee and timely delivery.

Scenario 4: Buyer Wants the Agent to Write an Appraisal Clause

The buyer asks the sales agent to draft custom wording allowing termination if the appraisal is low.

Best exam recognition: Unauthorized practice of law and possible appraisal addendum issue.

Why: TREC Rule 537.11 prohibits agents from drafting or recommending legal language such as appraisal clauses. Use an approved form where applicable or advise attorney consultation.

Scenario 5: Fire Before Closing

After the effective date, a kitchen fire damages part of the property. Seller cannot restore the property before closing.

Best exam recognition: Paragraph 14 casualty loss.

Why: Damage after the effective date is casualty loss, not simply inspection or repair negotiation.

Multiple-Choice Practice Questions

Try these original questions before checking the key. They are written the way the exam tends to test the contract: a fact pattern that points to one paragraph, form, or remedy.

1. Form recognition

A buyer is purchasing a resale condominium unit. Which contract should the license holder use?

A. The One to Four Family Residential Contract, because a condo is residential. B. The Residential Condominium Contract, because TREC does not use the One to Four Family form for condos. C. The New Home Contract, because the unit is being sold individually. D. The Farm and Ranch Contract, because the unit is part of a larger structure.

2. Option fee and termination

A contract states an option fee and a 10-day option period, but the buyer never delivers the option fee within the time required. What is the result?

A. The buyer still has the unrestricted right to terminate during the option period. B. The buyer does not obtain the unrestricted termination right under Paragraph 5. C. The earnest money automatically converts to the option fee. D. The seller must extend the option period until the fee is paid.

3. Special Provisions

A buyer asks the sales agent to write an escalation clause into Paragraph 11, Special Provisions. What should the agent do?

A. Draft the escalation clause, because Special Provisions is for additional terms. B. Draft the clause but label it "informational only." C. Decline to draft legal language and use an approved form or advise attorney consultation. D. Move the clause to Paragraph 12 instead.

4. Possession after closing

The seller needs to remain in the home for ten days after closing and funding. What is the correct way to handle this?

A. A verbal agreement between the parties is sufficient. B. A Seller's Temporary Residential Lease. C. A Buyer's Temporary Residential Lease. D. Nothing is needed; possession always transfers after closing.

5. Damage after the effective date

After the effective date but before closing, a kitchen fire damages the home, and the seller cannot restore it before closing. Which paragraph controls the buyer's options?

A. Paragraph 7, because it is a condition issue. B. Paragraph 9, because it affects closing. C. Paragraph 14, casualty loss. D. Paragraph 15, default.

Multiple-Choice Answer Key

1. Form recognition

Answer: B. TREC states the One to Four Family Residential Contract is not used for condominium transactions. A resale condo unit uses the Residential Condominium Contract.

2. Option fee and termination

Answer: B. The unrestricted termination right depends on a stated option fee and timely delivery. Without timely payment, the buyer does not get the option-period termination right under Paragraph 5. The option fee is not the same as earnest money.

3. Special Provisions

Answer: C. TREC Rule 537.11 prohibits brokers and sales agents from drafting legal language, and it names escalation clauses as a prohibited example. The safe move is an approved form where one exists, or attorney consultation. Paragraph 11 is for informational items only.

4. Possession after closing

Answer: B. When the seller stays after closing, possession should be covered by a Seller's Temporary Residential Lease. A buyer moving in before closing would use a Buyer's Temporary Residential Lease. Off-timeline possession without a written lease creates a tenancy-at-sufferance risk.

5. Damage after the effective date

Answer: C. Damage after the effective date is a casualty loss under Paragraph 14, not an inspection or repair issue under Paragraph 7. If the seller cannot restore the property, the buyer may terminate for an earnest money refund, extend time, or accept the property with an insurance-proceeds assignment and deductible credit where permitted.

Common Traps on the One to Four Family Contract

Your Next Study Move

If you can identify the paragraph before looking at the answer choices, you are using the form the way the exam expects. Take the five questions above without notes. If you miss two or more, return to the paragraph map and review only the rows tied to those mistakes.

When you are ready for a mixed set, use the free Texas real estate practice test. To keep your results, target weak topics, and continue on your phone, download Pass Texas. The app is free to download and includes free study access before any purchase decision.

What To Pair With This

FAQ

What is the One to Four Family Residential Contract used for?

It is used for resale residential properties that are single-family homes, duplexes, triplexes, or fourplexes. TREC says it is not for condominium transactions, new homes sold by a builder, or farm and ranch properties.

What is the current TREC One to Four Family Contract version?

TREC No. 20-19 became effective July 1, 2026. TREC identifies it as the current One to Four Family Residential Contract (Resale). Always confirm the active version on TREC before using a form in a real transaction.

What changed in TREC Form 20-19?

The 2026 form added generators to Paragraph 2B, defined Legal Holiday in Paragraph 5A(2), added the Seller's Water Disclosure in Paragraph 7I, reorganized settlement and brokerage-compensation language, expanded governmental reporting language, reorganized the Paragraph 22 addenda list, and updated the broker information page.

What paragraph covers earnest money and option fee?

Paragraph 5 covers earnest money, additional earnest money, the option fee, and the termination option. It is one of the most tested paragraphs because it combines money, deadlines, and termination rights.

What paragraph is the unauthorized practice of law trap?

Paragraph 11 is the major trap because it is for informational items only. A broker or sales agent should not draft legal clauses, contingencies, remedies, or language affecting party rights. TREC Rule 537.11 reinforces that boundary.

What does Paragraph 21 cover?

Paragraph 21 covers notices. Notices from one party or the party's agent to the other must be in writing and sent by a method authorized in the contract. Connect a late, oral, or misdirected notice to Paragraph 21 and any paragraph that created the deadline.

What do the receipt sections on the last page cover?

The last page separates receipt of the contract from receipt of earnest money, the option fee, and any additional earnest money. Do not assume one acknowledgment proves that every payment was received on time.

Can a Texas sales agent explain this contract?

A license holder may explain informational items or choices in the form, but may not give legal advice or opinions about legal effect. If the party asks for legal interpretation, custom language, or advice about rights and remedies, the license holder should advise attorney consultation.

Source check completed September 5, 2026: Paragraph numbering and contract rules were checked against TREC No. 20-19. Drafting boundaries were checked against 22 TAC Rule 537.11. Exam weighting was checked against Pearson VUE's Texas Sales Agent State Law outline effective January 1, 2026. The examples and questions are original study material, not official Pearson VUE questions.

Sources and Methodology

This article uses official sources first and translates the contract into exam-facing study patterns.

The method:

1. Use TREC's One to Four Family Residential Contract page to confirm scope, form ID, effective dates, and use limits.
2. Use the TREC No. 20-19 form to follow the paragraph structure from parties through receipts.
3. Use TREC's Contracts page to identify related addenda and current form-version caveats.
4. Use TREC's current temporary-lease and Form 61-0 pages for form scope and names.
5. Use TREC Rule 537.1 for definitions of contract forms, mandatory use, voluntary use, license holder, and informational item.
6. Use TREC Rule 537.11 for mandatory form use and unauthorized practice of law boundaries.
7. Use Pearson VUE's Texas content outline to confirm that promulgated contracts, forms, and addenda are exam topics.
8. Convert each paragraph into exam clues, common mistakes, and original scenarios.

Official Source Links

• TREC: One to Four Family Residential Contract (Resale), TREC No. 20-19
• TREC: Contracts
• TREC: Seller's Temporary Residential Lease, Form 15-7
• TREC: Buyer's Temporary Residential Lease, Form 16-7
• TREC: TREC Rules
• Pearson VUE: Texas Real Estate
• Pearson VUE: Texas Real Estate Content Outlines PDF