⸺ On this page
1. The deadlines that decide everything
2. How the termination option works
3. What we look for in a review
4. The seller’s disclosure notice
5. Earnest money disputes
6. Commercial contracts
7. Frequently asked questions
The deadlines that decide everything
Everything counts from the effective date — the date the last party signs and communicates acceptance. Get that date wrong and every deadline below is wrong with it.
| Deadline | What’s due | What happens if you miss it |
| Within 3 days of the effective date | Earnest money and option fee delivered to the escrow agent | The termination option may never take effect |
| End of the option period | Terminate, or lose the unrestricted right to walk | Earnest money at risk from that point on |
| Third party financing approval deadline | Obtain approval or terminate under the addendum | Financing contingency lost |
| Title objection deadline | Object in writing to items in the commitment or survey | Objections waived |
| On or before the effective date | Seller’s disclosure notice delivered (§ 5.008) | Late delivery gives buyer 7 days to terminate |
| Survey deadline | Existing survey plus T-47 affidavit, or order a new one | Broad survey exception stays in the policy |
| Closing date | Close, or be in default | Default remedies available to the other side |
Day three is day three. If the third day falls on a Saturday, Sunday, or federal holiday the deadline rolls to the next business day — and that is the only grace the contract gives you. There is no informal extension and no “the title company was closed.” Deliver early.
How the termination option works
The termination option is the most valuable right a Texas buyer has, and it is also the one most commonly forfeited by accident.
What it does
For the option fee, the buyer gets an unrestricted right to terminate the contract during the option period — for any reason, or none. Inspection results, cold feet, a better house, a bad feeling. No justification required.
Where the money goes
| Option fee | Earnest money | |
|---|---|---|
| Paid to | Escrow agent (title company) | Escrow agent (title company) |
| Deadline | 3 days after effective date | 3 days after effective date |
| Buys you | The unrestricted right to terminate | Good faith; it is the deposit at risk |
| If you close | Credited to the sales price | Credited to the sales price |
| If you terminate in the option period | Seller keeps it | Refunded to the buyer |
| If you walk after the option period | Seller keeps it | At risk |
The 2021 change that helped buyers. The option fee used to go to the seller, and buyers lost termination rights over delivery disputes. It now goes to the escrow agent, which means one combined payment and a clean record of when it was delivered. Keep proof of delivery regardless.
What we look for in a review
The effective date — filled in, correct, and matching the signature dates.
Handwritten or typed-in changes. A license holder may fill blanks but may not draft. Altered language often does not do what someone intended.
The option period and fee — long enough to actually inspect, and delivered on time.
Financing addendum — the approval deadline, and whether the contingency is for buyer approval or property approval.
Title and survey paragraphs — who pays, which survey is being used, and the objection deadline.
Which addenda are attached — HOA, seller financing, lead-based paint for pre-1978 homes, back-up contract, third party financing.
The seller’s disclosure notice — delivered, complete, and consistent with what the inspection finds.
Property description — the legal description, not just the address, and what personal property is included or excluded.
Default and remedies — what each side can do, and any attorney’s fees provision.
Special provisions — the paragraph where the most damage is usually done.
The seller's disclosure notice
Texas Property Code § 5.008
A seller of residential real property comprising not more than one dwelling unit must give the purchaser a written notice of the property’s condition on or before the effective date of the contract. If the notice is delivered late, the purchaser may terminate the contract for any reason within seven days after receiving the notice.
Exemptions include court-ordered and foreclosure sales, transfers by a trustee in bankruptcy, transfers to a mortgagee or beneficiary, transfers by a fiduciary administering an estate, transfers between co-owners, transfers to a spouse or a lineal relative, transfers pursuant to a divorce, transfers to or from a governmental entity, new residences never occupied, and property where any dwelling represents less than five percent of the total value.
For buyers. Compare the disclosure against your inspection report. A defect the seller knew about and did not disclose is a very different conversation than one nobody knew about.
For sellers. Fill it out honestly and completely. “Unknown” is an acceptable answer when it is true. A disclosure that omits a known problem is where post-closing litigation begins.
Earnest money disputes
The deal falls apart and the buyer wants the earnest money back. The escrow agent will generally not release it without a release signed by both parties — which gives an unreasonable seller real leverage over money that may plainly belong to the buyer.
01
Send a proper demand
A written demand to the escrow agent and the other party, with the contractual basis and the documentation showing timely termination.
02
Use the statutory remedy
Texas provides a demand procedure and a remedy against a party who refuses to sign a release without good cause, which can include damages and attorney’s fees.
03
Interpleader or suit
If it does not resolve, the escrow agent can deposit the funds with the court, or the dispute is litigated. This is the expensive outcome.
Most of these end at step one or two. A demand that cites the contract paragraph, attaches the timestamped termination notice, and states the consequence of an unjustified refusal usually produces a signature. And because Jireh is a trained mediator, where a dispute is really about something other than the deposit, there is often a faster path than a lawsuit.
Commercial contracts
TREC forms do not apply. There is no promulgated document, no standard option period, and none of the consumer protections built into the residential form. Everything is negotiated:
- The feasibility or due diligence period and what terminates during it.
- Deposit structure — when it goes hard, and how much.
- Representations and warranties, and how long they survive closing.
- Closing conditions, estoppels, and tenant deliverables.
- Remedies — specific performance, liquidated damages, or a cap.
- Assignment rights, which matter if the buyer intends to assign to an entity.
Have the contract reviewed before signing, not after. In a commercial deal there is no option period to save you.
Frequently asked questions
How long do I have to deliver earnest money and the option fee in Texas?
Under the current TREC One to Four Family Residential Contract, the buyer must deliver both the earnest money and the option fee to the escrow agent within 3 days after the effective date. If the third day falls on a Saturday, Sunday, or federal holiday, the deadline moves to the next business day. Since 2021 the option fee goes to the title company rather than to the seller, which lets the buyer send one combined payment.
What does the option fee actually buy?
An unrestricted right to terminate the contract for any reason, or no reason, during the option period. It is the strongest right the buyer has in the contract. The option fee is credited to the sales price at closing, but it is otherwise not refundable — if you walk, the seller keeps it. The earnest money is different: terminate properly within the option period and the earnest money comes back to you.
What happens if I miss the option period by a few hours?
You lose the unrestricted right to terminate. After the option period ends, you can only get out of the contract through a specific contractual right — a financing contingency, an unacceptable title commitment, a casualty provision — or by the seller’s default. Otherwise your earnest money is at risk. The option deadline is a hard deadline and it is enforced as one.
What is the effective date and why does it matter?
The effective date is the date the last party signs and that acceptance is communicated back — and it is the date every other deadline in the contract counts from. The option period, the earnest money deadline, the financing approval deadline, and the title objection window all run from it. Contracts routinely have the effective date filled in wrong or left blank, which puts every subsequent deadline in doubt. It is the first thing we check.
Does the seller have to give me a disclosure notice?
For most Texas sales of residential property comprising not more than one dwelling unit, yes — Texas Property Code § 5.008 requires a written seller’s disclosure notice on or before the effective date. Exemptions include foreclosure and court-ordered sales, transfers between co-owners, transfers to a spouse or lineal relative, fiduciary transfers administering an estate, and new construction never occupied. If the notice is delivered late, you may terminate the contract for any reason within seven days after receiving it.
Can my real estate agent change the contract for me?
No. Texas license holders must use the promulgated TREC forms and may fill in blanks, but drafting or materially altering contract language is the practice of law. If someone has typed a new paragraph into the contract or struck through printed language, that is a signal to have a lawyer look at it — both because the change may not do what was intended and because it may not be enforceable as written.
How do I get my earnest money back if the deal falls apart?
The escrow agent generally will not release earnest money without a release signed by both parties. That is what makes disputes sticky: even where the buyer clearly terminated within the option period, a seller who refuses to sign can leave the money sitting. Texas provides a demand procedure and a remedy against a party who refuses to sign a release without good cause, which can include damages and attorney’s fees. Most of these resolve with a properly written demand rather than a lawsuit.
Is a commercial contract different?
Entirely. TREC forms do not apply to commercial transactions, so there is no standard document and no promulgated protections. Every provision — the feasibility period, deposit structure, representations, remedies, and closing conditions — is negotiated. Commercial contracts genuinely require an attorney; residential resales on an unmodified TREC form often do not.
Written and reviewed by Jireh Davis, J.D., MBA
Attorney and mediator at J. Davis Law & Mediation. Licensed in Texas. Practice focused on estate planning, probate, and business law for families and owners across Harris, Fort Bend, Montgomery, Tarrant, and Dallas Counties.
Last reviewed: September 2026 · Citations are to the Texas Estates Code, Texas Property Code, and federal law as noted.
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