Is the Texas Real Estate Commission now advocating the use of unlicensed tradespeople and contractors?

I received a newsletter from the Texas Association of Realtors (TAR) that had an unbelievable story regarding new changes to the promulgated forms for the sale of residential property.  These changes appear to indicate that TREC is now advocating the use of unlicensed tradespersons to work on the home you are about to buy![tab: Introduction]

It appears that changes have been made to the various promulgated (minimum required) contract forms that must be used in Texas for the sale of residential property.  This change affects the contracts for existing homes, farm and ranch homes, newly built homes, and condominiums.  The change is basically the same for these contracts so we will only look at what has changed in the TREC Form 20-11 (existing contract) and Form 20-12 (amended contract required on 1 June 2014) which is the contract used for the sale of 1 – 4 family residential homes.  This is the new changes that TREC has made.

Form 20-11 (existing contract)

7. PROPERTY CONDITION:
F. COMPLETION OF REPAIRS AND TREATMENTS: Unless otherwise agreed in writing, Seller shall complete all agreed repairs and treatments prior to the Closing Date. All required permits must be obtained, and repairs and treatments must be performed by persons who are licensed or otherwise authorized by law to provide such repairs or treatments. At Buyer’s election, any transferable warranties received by Seller with respect to the repairs and treatments will be transferred to Buyer at Buyer’s expense. If Seller fails to complete any agreed repairs and treatments prior to the Closing Date, Buyer may exercise remedies under Paragraph 15 or extend the Closing Date up to 15 days if necessary for Seller to complete the repairs and treatments.

Form 20-12 (new contract required for use as of 1 June 2014)

7. PROPERTY CONDITION:
F. COMPLETION OF REPAIRS AND TREATMENTS: Unless otherwise agreed in writing: (i) Seller shall complete all agreed repairs and treatments prior to the Closing Date; and (ii) all required permits must be obtained, and repairs and treatments must be performed by persons who are licensed to provide such repairs or treatments or, if no license is required by law, are commercially engaged in the trade of providing such repairs or treatments. At Buyer’s election, any transferable warranties received by Seller with respect to the repairs and treatments will be transferred to Buyer at Buyer’s expense. If Seller fails to complete any agreed repairs and treatments prior to the Closing Date, Buyer may exercise remedies under Paragraph 15 or extend the Closing Date up to 5 days if necessary for Seller to complete the repairs and treatments.

 

The change is very subtly written but it is very clear what has changed.  I have placed in bold and underline the important parts.  Under the old contract it was plain and clear that all repairs you negotiated for MUST be properly permitted (if necessary), use only properly licensed tradespeople (if required by Texas licensing laws), and if a trade is not licensed (i.e. roofers) they must otherwise we authorized by law to perform such work.  Under the new form it also is quite clear that TREC has reverted to the Wild West concept that any Handyman without proper licensing or allowance by law can now perform those repairs if you agree to it.

So what’s the problem with this new change?  Are there not Handymen out there that can properly perform a repair?  So what’s the difference if the owner just gets a bad licensed tradesperson to make that repair?  The main problem with this change is that it further removes accountability to properly and safely perform repairs on a home that you are about to buy and places that accountability square on your shoulders if you agree in writing that the properly trained and licensed persons are not required for the repairs!  Yes there might well be some Handymen out there that can perform the repairs required by law to be performed by a licensed tradesperson.  However having an unlicensed Handyman perform the repairs takes away yet another layer of accountability as the licensing departments might chase down an unlicensed person but obviously not as quickly or vehemently as they would a tradesperson licensed under their control!

To see how important this change has become we will look at two examples of how this new form and rule can affect you and the safety of your family!  First we will start with a licensed trade such as Plumbers and the replacement of a gas fires water heater that you have negotiated will be replaced before closing on the home.  I recently wrote a Blog post about a $15.00 Temperature & Pressure Relief Valve (TPRV) and how critical they are in the safety of your family and home.  Before you continue here I want you to read this short Blog post and by all means at least watch the “Mythbusters Water Heater Explosion” video link on that post.  This Blog post can be found HERE. When you are done with that post come back here to continue on with this very important discussion!

Hopefully you have read that Blog post and watched the video?  I used this as a very clear example of how the new TREC contract verbiage can place your family’s life in danger!  Almost every municipality (City) in the Dallas/Fort Worth area requires that a water heater replacement be properly permitted, and the work either performed by a professional and licensed Plumber or at least reviewed by the City during the permit inspection for proper replacement.  Something as simple as a missing or improperly installed TPRV van be a significant life safety hazard!  Yet under the new TREC contract language you can waive your right to have that water heater properly replaced by agreeing with the seller not to use a properly licensed Plumber and not to have the replacement properly permitted by the local municipality.  When the home sales market starts to pick up again, as it is being reported to now, then there is now one more thing a seller can hold over your head if you really want to purchase that home!  So how is that change in the contract language beneficial in any part to you as a buyer?

The second example we will use is one that does not have a specific trade license but does have other control criteria by the State and local governments to help protect you.  That other example is a common repair request and involves roofing companies/roofers.  There is currently no specific trade license for roofing issued by the State of Texas.  However I’ll bet you were not aware that many local municipalities are requiring permits for roofing work and do require roofers and roofing companies to register with the municipality if they want to do business in their jurisdiction.  Also I’ll bet you were not aware that The State of Texas does require roofers to register and pay Franchise Tax and potentially sales tax on their work and products they put on your home.  Some people believe all this regulation is just to make more money for the governments.  In actuality the fees that are charged for registering as a contractor, and obtaining the proper permits, are so small they do little to add to the local governments budgets.  As for the Texas Sales and Franchise Taxes those monies are used not only to run the government but also in many programs that benefit your local towns.

However instead of looking at it as a “Money Grab” by local governments you should be looking at it from the angle of consumer protection!  When a business properly registers and pays it taxes not only are they subject to losing those registrations with bot local but State governments, but they are signalling that they are serious about their business and do intend to stay around.  We have plenty of “Gypsy Roof Companies” running around that are in business one day and gone the next only to restart under a new name and none of them properly registered.  So think of this one simple concept.  If the seller uses a hack roofing company to perform those roof repairs you negotiated for, typically because they were the cheapest bid out there, and this is all done outside the rainy season or with little to no significant rains until after closing, then when do you think that hack roofing company’s bad work is going to show up?  Why after you move in of course!  So now you get to have the work properly performed and all out of your own pocket as it most likely would not be worth trying to chase the seller down and the hack roofing company might not be around or willing to honor any supposed work guarantee.

So what does this all mean to you?  It means you need to be additionally vigilant when signing your offer contract as well as any follow on renegotiating paperwork.  You will be held accountable if you sign and allow unlicensed persons to perform the repair work for the buyer!  That in itself is just another example of how the real estate purchasing process is being stacked against the buyer!  I’ll leave you with just one more thought and it is based on the TREC Mission Statement that is displayed next.

Mission of TREC/TALCB
The agency exists to safeguard the public interest and protect consumers of real estate services. In accord with state and federal laws, the agency oversees real estate brokerage, appraisal, inspection, home warranty and timeshare interest providers. Through education, licensing and regulation, the agency ensures the availability of qualified and ethical service providers, thereby facilitating economic growth and opportunity in Texas.

 

So the million dollar question is how do these new contract changes “safeguard the public interest and protect consumers”??  From all appearances they have been made to strictly facilitate the fast sale of a home to the unsuspecting buyer.  Also to the original question of “Is the Texas Real Estate Commission now advocating the use of unlicensed tradespeople and contractors?” I’ll leave that answer to you as I already have my answer!

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