Texas Buyer Glossary

Definitions only. Every entry says where the definition comes from, and where a term has no legal definition it says that instead of inventing one.

Three of these terms are defined by the TREC contract, several by statute, and a few are trade usage that no form or statute defines. Those are marked, because the difference matters when someone tells you what a term means.

Terms in the contract

Effective Date

The date written into the execution block of the TREC contract, which reads "EXECUTED the ___ day of , 20 (Effective Date)".

Nearly every deadline in the contract counts from it, including delivery of earnest money and the option fee, the length of the option period, and delivery of the seller's disclosure notice.

Source: TREC form 20-19, execution block.

Earnest money

Money the buyer delivers to the escrow agent, in the amount written into the contract, within 3 days after the Effective Date.

The contract uses the term throughout and never defines it. What it does instead is set out what happens to the money: if the buyer terminates within the option period, "any earnest money will be refunded to Buyer", and if the buyer fails to deliver it on time the seller "may terminate this contract or exercise Seller's remedies under Paragraph 15, or both".

Trade usage given operational meaning by the contract rather than a defined term. No statute or form defines the amount, and this page does not state a customary one.

Source: TREC form 20-19, paragraph 5.A and 5.C.

Option fee

A separate amount, also delivered to the escrow agent within 3 days after the Effective Date, that buys the buyer the termination option.

The contract directs that money the escrow agent receives is "applied first to the option fee, then to the earnest money", that the escrow agent may release the option fee to the seller "at any time without further notice to or consent from Buyer", and that "the option fee will be credited to the Sales Price at closing".

If the buyer terminates during the option period, "the option fee will not be refunded".

Source: TREC form 20-19, paragraph 5.A and 5.B.

Termination option, and the Option Period

The contract's own words: for the option fee, "Seller grants Buyer the unrestricted right to terminate this contract by giving notice of termination to Seller within ___ days after the Effective Date of this contract (Option Period)".

Two mechanics are in the same paragraph. Notice "must be given by 5:00 p.m. (local time where the Property is located) by the date specified". And if no dollar amount is written as the option fee, or the buyer does not deliver it in time, "Buyer shall not have the unrestricted right to terminate this contract under this paragraph 5".

The number of days is a blank on the form. It is negotiated, and this page does not state a customary length.

Source: TREC form 20-19, paragraph 5.B and 5.D.

Escrow agent

The party holding the earnest money and option fee, named in the contract.

The contract is explicit about what the escrow agent is not: "The Escrow Agent is not (i) a party to this contract and does not have liability for the performance or nonperformance of any party to this contract, (ii) liable for interest on the earnest money".

Source: TREC form 20-19, paragraph 18.A.

Title commitment

Called the Commitment in the contract. A commitment for title insurance, furnished to the buyer with legible copies of restrictive covenants and the documents evidencing exceptions listed in it.

The contract's timing: "Within 20 days after the Title Company receives a copy of this contract, Seller shall furnish to Buyer a commitment for title insurance (Commitment)".

Source: TREC form 20-19, paragraph 6.B.

Survey

The contract does not define the word. It sets a requirement: the survey "must be made by a registered professional land surveyor acceptable to the Title Company".

Trade usage, with the contract controlling who may make one and when a new one is required.

Source: TREC form 20-19, paragraph 6.C.

T-47 affidavit, and the T-47.1 declaration

The document a seller provides alongside an existing survey so the title company can rely on that survey rather than requiring a new one.

The contract names both forms: "Seller's existing survey of the Property and a Residential Real Property Affidavit or Declaration promulgated by the Texas Department of Insurance (T-47 Affidavit or T-47.1 Declaration)".

If the title company or the buyer's lender does not accept the existing survey or the affidavit, the contract requires a new survey.

Source: TREC form 20-19, paragraph 6.C.

Prorations

The division of items that span the closing date. The contract prorates "Taxes for the current year, interest, rents, and regular periodic maintenance fees, assessments, and dues (including prepaid items) ... through the Closing Date".

One sentence in the same paragraph is worth reading twice: "The tax proration may be calculated taking into consideration any change in exemptions that will affect the current year's taxes."

Source: TREC form 20-19, paragraph 13.

Terms defined by statute

Seller's Disclosure Notice

The written notice a seller of residential property must give the buyer, prescribed by Section 5.008 of the Texas Property Code.

The statute requires "a written notice as prescribed by this section or a written notice substantially similar to the notice prescribed by this section which contains, at a minimum, all of the items in the notice prescribed by this section".

Source: Texas Property Code Section 5.008. The TREC contract references it at paragraph 7.B.

Information About Brokerage Services, the IABS

The written notice a real estate license holder must give at the start of a working relationship.

Section 1101.558(b-1) of the Occupations Code requires that, at the time of a license holder's first substantive communication with a party about a specific property, the license holder provide written notice "in at least a 10-point font" that "describes the ways in which a broker can represent a party to a real estate transaction, including as an intermediary".

Source: Texas Occupations Code Section 1101.558.

Municipal utility district, a MUD

A unit of local government that finances water, sewer and drainage facilities by issuing bonds and levying a property tax to repay them.

The TREC contract calls it a statutory tax district and requires the notice: if the property is "in a utility or other statutorily created district providing water, sewer, drainage, or flood control facilities and services, Chapter 49, Texas Water Code, requires Seller to deliver and Buyer to sign the statutory notice relating to the tax rate, bonded indebtedness, or standby fee of the district prior to final execution of this contract".

The prescribed notice under Section 49.4521 carries the sentence "The cost of district facilities is not included in the purchase price of your property."

Source: Texas Water Code Sections 49.452 and 49.4521. TREC form 20-19, paragraph 6(3).

Public improvement district, a PID

A defined area where a city or county funds improvements that confer, in the statute's words, "a special benefit on a definable part of the municipality or county or the municipality's extraterritorial jurisdiction".

A PID is not a taxing district. The cost arrives as an assessment, and the notice a seller must give says so: "AN ASSESSMENT HAS BEEN LEVIED AGAINST YOUR PROPERTY FOR THE AUTHORIZED IMPROVEMENTS, WHICH MAY BE PAID IN FULL AT ANY TIME. IF THE ASSESSMENT IS NOT PAID IN FULL, IT WILL BE DUE AND PAYABLE IN ANNUAL INSTALLMENTS."

The same notice states that failure to pay "may result in penalties and interest being added to what you owe or in a lien on and the foreclosure of your property."

Source: Texas Property Code Section 5.014. Texas Local Government Code Section 372.003. TREC form 20-19, paragraph 6(7).

Extraterritorial jurisdiction, the ETJ

Unincorporated land next to a city, within a distance the statute sets by the city's population.

Section 42.021 defines it as "the unincorporated area that is contiguous to the corporate boundaries of the municipality" and located within one-half mile for a city under 5,000 people, one mile for 5,000 to 24,999, two miles for 25,000 to 49,999, three and a half miles for 50,000 to 99,999, and five miles for a city of 100,000 or more.

The contract's annexation notice tells a buyer that property outside a city "may now or later be included in the extraterritorial jurisdiction of a municipality and may now or later be subject to annexation".

Source: Texas Local Government Code Section 42.021. Texas Property Code Section 5.011. TREC form 20-19, paragraph 6(5).

Terms on a tax bill

Market value

Section 1.04(7) of the Tax Code: "the price at which a property would transfer for cash or its equivalent under prevailing market conditions" if exposed for sale in the open market for a reasonable time, with both parties knowing the property's uses and restrictions.

Source: Texas Tax Code Section 1.04(7).

Appraised value

Section 1.04(8): "the value determined as provided by Chapter 23 of this code". For a homestead, Chapter 23 is where the appraisal cap lives, which is why appraised value and market value can differ.

Source: Texas Tax Code Section 1.04(8).

Assessed value

Section 1.04(9): "the amount determined by multiplying the appraised value by the applicable assessment ratio".

Source: Texas Tax Code Section 1.04(9).

Taxable value

Section 1.04(10): "the amount determined by deducting from assessed value the amount of any applicable partial exemption". This is the figure a tax rate is applied to.

Source: Texas Tax Code Section 1.04(10).

Residence homestead exemption

An exemption from taxation of part of the value of an owner's residence.

The school district amount under Section 11.13(b) is $140,000 for tax year 2026. Other taxing units may adopt a local option percentage under Section 11.13(n), which "may not exceed 20 percent" and cannot produce an exemption of less than $5,000.

Source: Texas Tax Code Sections 11.13(b) and 11.13(n).

Appraisal cap

The limitation in Section 23.23 on how much the appraised value of a residence homestead may rise in a year. The ceiling is the lesser of market value, or last year's appraised value plus 10 percent of it plus the market value of new improvements.

Section 23.23(e) states that a new improvement "does not include repairs to or ordinary maintenance of an existing structure or the grounds".

Source: Texas Tax Code Section 23.23.

Terms left out on purpose

Some words a buyer will hear have no definition in any form or statute, and an honest entry would have to invent one. They are named here rather than approximated.

Customary amounts are absent throughout. There is no statutory or promulgated figure for earnest money, for an option fee, or for the length of an option period. Each is a blank on the contract.

"As is" is not defined as a standalone term. The TREC contract deals with property condition through a specific paragraph with its own defined choices, and a one-line definition would misstate it.

Escalation clauses, appraisal gaps and rate buydowns are lender and negotiation practice. No TREC form or Texas statute defines them, so they are not here.

Closing costs are itemised by the contract at paragraph 12 rather than defined as a term, and any figure would be a number this page cannot source.