Addendum

TREC 26-8 — Seller Financing Addendum

This addendum establishes the terms and conditions of seller financing when the seller agrees to carry back a promissory note as part of the purchase price. It defines the buyer's credit documentation requirements, the seller's right to approve or reject the buyer's credit, the terms of the promisso

Source: TREC
Form Number: 26-8
Category: Addendum
Revised: November 7, 2022

Used For

Residential Sales, Farm & Ranch, Vacant Land

Form Outline

The TREC 26-8 form is organized into the following sections:

  1. Header and Preamble
    Identifies the property, warns that seller financing is complex and potentially subject to lending laws, and advises parties to consult an attorney and financial professional before signing.
  2. Credit Documentation
    Specifies what credit documentation the buyer must provide to the seller and the deadline for delivery. The buyer authorizes credit agencies to release credit reports to the seller at the buyer's expense.
  3. Buyer's Credit Approval
    Establishes two outcomes for credit review: (1) if documentation is NOT delivered on time, seller can terminate and keep the earnest money; (2) if documentation IS delivered but seller finds credit unacceptable, seller can terminate within 7 days and earnest money is refunded to buyer. If seller does not terminate, credit is deemed approved.
  4. Promissory Note
    Defines all terms of the promissory note: principal amount, interest rate, prepayment rights, late fees, default interest, and one of three payment structures (lump sum, amortizing monthly payments, or interest-only followed by amortizing payments).
  5. Deed of Trust
    Introduces the deed of trust provisions that will secure the promissory note. The deed of trust is the security instrument that gives the seller a lien on the property.
  6. Property Transfers (Due-on-Sale)
    Determines whether the buyer can transfer the property without seller's consent. Option (a) allows free transfer as long as the new buyer assumes the note. Option (b) is a due-on-sale clause giving the seller the right to accelerate the note if the property is transferred without consent, with certain exceptions.
  7. Casualty Insurance
    Determines whether the buyer must obtain casualty (hazard) insurance naming the seller as a mortgagee loss payee, protecting the seller's interest in the property.
  8. Tax and Insurance Escrow
    Determines whether the seller will collect escrow for property taxes and insurance with each payment installment, or whether the buyer will handle taxes and insurance independently and provide proof of payment to the seller.
  9. Prior Liens
    Creates a cross-default provision: if the buyer (or seller, if the seller has an existing mortgage) defaults on any lien that is superior to the seller-financed deed of trust, it automatically constitutes a default on the seller's deed of trust as well.
  10. Signatures
    Signature lines for all buyers and sellers to execute the addendum, plus the TREC disclaimer that the form is not intended for complex transactions.

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