In Texas, when does a real estate contract become binding?
Question & Answer
Review the question and all answer choices
When the buyer signs
The buyer signing alone constitutes only an offer or a partial execution; no binding contract exists until the seller also signs and that acceptance is communicated back to the buyer.
When the seller signs
This option is incorrect because "When the seller signs" does not match the rule tested by the question. The correct answer is "When both parties have signed and one party has communicated acceptance". A contract becomes binding when both parties sign and acceptance is communicated (the effective date).
When both parties have signed and one party has communicated acceptance
When earnest money is deposited
Earnest money deposit is a performance obligation that follows contract formation; it is not a condition that creates the contract. A contract can be fully binding even before earnest money is delivered to the escrow holder.
Why is this correct?
Answer C is correct because Texas contract law and the TREC-promulgated contract forms define the 'effective date' as the date when the last party signs AND the signing is communicated to the other party or their agent, creating mutual assent. This two-step requirement — signature plus communication — ensures both parties are aware the contract is fully executed before obligations begin running. The TREC One to Four Family Residential Contract explicitly includes a blank for the 'effective date,' which is filled in when the final acceptance is communicated.
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