Texas Title Blog

Paragraph 4 of One to Four Family Residential Contract Explained

October 16, 2020
By: Stephen Etzel

Paragraph 4 of One to Four Family Residential Contract Explained

Paragraph 4 of TREC One to Four Family Residential Contract is an important section to understand.

Paragraph 4 is known as the License Disclosure “section” (which replaced the Finance paragraph prior to January 1st, 2016). This was always a requirement but was not in the contract. Instead, agents were adding to Special Provisions.

Paragraph 4 of One to Four Family Residential Contract Explained

Texas Law requires that a license holder who is a party to a transaction, or acting on behalf of any of the following, disclose that information:

  • License Holder
  • Spouse
  • Parent
  • Child
  • Business Entity, if the license holder owns more than 10% – TREC rule (If the license holder is a REALTOR® – Article 4 of the NAR Code of Ethics – The agent shall not acquire an interest in or buy or present offers from themselves, any member of their immediate families, their firms, or any member thereof, or any entities in which they have any ownership interest, any real property without making their true position known to the owner or the owner’s agent or broker. In selling property, they own, or in which they have any interest, REALTORS ® shall reveal their ownership or interest in writing to the purchaser or the purchaser’s representative). (Amended 1/00)
  • Trustee (manager/owner of the trust) of a Trust or of which the license holder or the license holder’s spouse, parent, or child is the beneficiary (one who benefits from the trust).

This information must be disclosed to the other party in writing before entering the contract, through an email or the like instead. If the seller or buyer is not a license holder, it is N/A.

This article about Paragraph 4 of TREC’s One to Four Family Residential Contract is intended for reference only, and should not be considered a substitute for legal or title underwriter advice that is based on specific facts of a transaction.

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Stephen Etzel

Stephen Etzel
Owner of Stephen Etzel Consulting

For over 22 years, he has helped clients in the real estate industry with continuing their education and enhancing their businesses. Teaching is his passion, which is why he enjoys assisting agents and brokers with learning new subjects. He also loves sharing ideas and knowledge to help businesses thrive.

Certifications: GRI, SRES, ABR, CDEI


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