The Third Party Financing Addendum (TREC No. 40-11) attaches to a TREC contract any time financing is coming from someone other than the buyer or seller. TREC's own language: it "is used when any type of financing for all or part of the purchase price will be provided by a third-party (not the Seller or Buyer)." The current version is dated 11-04-2024 and replaces TREC No. 40-10.
Paragraph 1 — type of financing
The buyer checks one or more boxes describing the loan(s) being applied for, each with its own blanks for principal amount, term, interest-rate cap, and origination-charge cap:
- A. Conventional financing — first and/or second mortgage.
- B. Texas Veterans Loan — from the Texas Veterans Land Board, at the Board's established rate.
- C. FHA insured financing.
- D. VA guaranteed financing.
- E. USDA guaranteed financing.
- F. Reverse mortgage financing (Home Equity Conversion Mortgage) — with a checkbox for whether it will be FHA-insured.
- G. Other financing — a loan type not described above. This is the only box with its own termination-rights checkbox: the buyer checks whether they do or do not waive all rights to terminate under Paragraph 2B for that specific loan.
Paragraph 1 opens with the buyer's duty: "apply promptly for all financing described below and make every reasonable effort to obtain approval for the financing, including but not limited to furnishing all information and documents required by Buyer's lender."
Paragraph 2 — approval has two parts
The form is explicit that financing "Approval" isn't one event — it's two, and both have to clear: Buyer Approval and Property Approval. "Time is of the essence for this paragraph and strict compliance with the time for performance is required."
| Feature | Buyer Approval (¶ 2A) | Property Approval (¶ 2B) |
|---|---|---|
| Protects against | Buyer can't qualify — assets, income, or credit history | Property doesn't satisfy the lender's underwriting requirements (appraisal, insurability, required repairs) |
| Termination window | A negotiated number of days after the Effective Date — the form leaves this blank for the parties to fill in | Fixed in the form: on or before the 3rd day before the Closing Date |
| What buyer must deliver | Notice of termination + a copy of the lender's written statement giving the reason(s) | Same — notice of termination + lender's written statement |
| Earnest money if buyer terminates | Refunded to buyer | Refunded to buyer |
| Only applies if | The contract box is checked "subject to Buyer obtaining Buyer Approval" | Always applies — not a checkbox option |
Paragraph 2A's exact deemed-obtained language: Buyer Approval "will be deemed to have been obtained when (i) the terms of the loan(s) described above are available and (ii) lender determines that Buyer has satisfied all of lender's requirements related to Buyer's assets, income and credit history." If the buyer doesn't terminate inside the negotiated window, the contract is no longer contingent on Buyer Approval — the buyer has effectively waived that exit.
Paragraph 3 — security
"If required by Buyer's lender, each note for the financing described above must be secured by vendor's and deed of trust liens."
Paragraph 4 — FHA/VA required provision
If FHA or VA financing is involved, the buyer isn't obligated to close or forfeit earnest money unless they've been given a written appraisal statement from HUD/FHA, the VA, or a Direct Endorsement Lender showing the appraised value is not less than a dollar amount filled in on the form — or the contract price exceeds the VA's established reasonable value. Notably: the 3-day notice-of-termination requirement in Paragraph 2B does not apply to Paragraph 4. The form also spells out that HUD does not warrant the property's value or condition, and that if the VA's reasonable value comes in below the sales price, the seller may reduce the sales price to match with proportionate down-payment and loan-amount adjustments.
Paragraph 5 — authorization to release information
The buyer authorizes the lender to give status updates to seller or buyer (or their representatives); both parties authorize the lender, title company, and escrow agent to share closing disclosures and settlement statements with the parties' respective brokers and sales agents.