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Texas · TREC 12-3Texas release of liability and VA entitlement addendum (TREC 12-3)

When a buyer assumes the seller's loan in Texas, TREC 12-3 makes both parties apply, within the days written, for the seller's release of liability (conventional, VA or FHA) and, if wanted, restoration of the seller's VA entitlement. A box decides what happens if approval is not in by the Closing Date: the contract terminates with the earnest money refunded, or closing goes ahead without it. VA restores entitlement only if the buyer is a qualified veteran with enough unused entitlement; the seller pays the cost.

What the addendum says

  1. Release of liability (¶A)

    Within the days written after the Effective Date, seller and buyer apply for release of the seller's liability from the conventional lender, VA or FHA and the lender, and furnish the documents required.

  2. VA entitlement (¶B)

    Within the days written, they apply for restoration of the seller's VA entitlement.

  3. If not approved by closing

    For each: either the contract terminates and the earnest money is refunded, or failure to obtain approval will not delay closing – one box only.

  4. Conditions and cost

    VA restores entitlement only if the buyer is a veteran with sufficient unused entitlement and otherwise qualified. The seller pays; the deed carries any required assumption clause.

What the TC tracks

  • The application deadlines in ¶A and ¶B.
  • Which box is checked – it decides whether a missing approval kills the deal or not.
  • The buyer's VA eligibility if restoration is wanted.
  • Use with the Loan Assumption Addendum (41-3).

Questions about TREC 12-3

What is TREC 12-3 used for?

To make the parties apply for the seller's release of liability on an assumed loan and, if desired, restoration of the seller's VA entitlement.

What if the release is not approved by closing?

It depends on the box checked: the contract terminates with the earnest money refunded, or closing proceeds without the release.

When will VA restore a seller's entitlement on an assumption?

Only if the buyer is a veteran, has sufficient unused VA entitlement and is otherwise qualified.

Who pays for the release and restoration?

The seller pays the cost of securing them.

Is TREC 12-3 used alone?

It is used with the Loan Assumption Addendum when the buyer assumes the seller's loan.

Texas forms

Add the release and VA restoration application deadlines as dated tasks on the deal in ClosingCode, with reminders.

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Source: Texas Real Estate Commission, TREC No. 12-3 Addendum for Release of Liability on Assumed Loan and/or Restoration of Seller's VA Entitlement (12-05-11).

General information, not legal advice. ClosingCode is software; it is not a law firm or brokerage, and it is not affiliated with TREC.