Ways to get out of your Texas real estate contract.

Now before we get started on a conversation about contracts, those who wear suits in the office want me to be very clear that I am not an attorney and this content is not to be taken as legal advice.

The contract used for your transaction may be different, and these 'outs' may not apply to your situation. Every transaction is unique. Before making any decisions based on the information provided, you should seek professional guidance from an attorney or a licensed real estate agent who can review your contract and provide advice specific to your circumstances. 

Because here’s the downside, Mistakes in the use of a form may result in financial loss or a contract which is unenforceable. When using any contract forms, you assume all risks associated with their proper use.

So don’t go running wild with this information—that would be like giving a kid a blowtorch without telling them how to use it or what happens if they light something on fire they didn’t want to. It’s just a bad idea.

Also, this content will be covering the one-to-four family residential resale contract from the Texas Real Estate Commission that became effective on January 3, 2025.

Buying a home is a major life event, like getting married, having kids, or finally learning how to fold a fitted sheet properly (spoiler: that may actually never happen).

But what if you’re a buyer and sign a real estate contract and suddenly get cold feet—or worse, discover something seriously wrong with the house, the deal, or your finances?

Fear not! There are several ways to exit a Texas One to Four Family Residential Contract without ending up in a courtroom or experiencing an existential crisis. I’ll cover a few of them, and I’ll try to keep it light hearted so this doesn't feel like you’re reading a tax code.

I’ll start by saying our Texas real estate contract is pretty buyer friendly when you compare the number of buyer ‘outs’ versus the number of seller ‘outs’. 

Just in the main contract, before any addenda are added, there are eight places where it says the buyer may terminate and “Earnest money will be refunded to Buyer.”

#1

We’ll start with The most common and most used out, also referred to as the Option Period.

In Texas, buyers can purchase a right to terminate the contract for any reason during the Option Period by paying an Option Fee. Think of this as your real estate mulligan. You can get out and take another chance on another home. 

If you have purchased an option period and back out by giving proper notification within the time allowed, then your earnest money is refunded, but you do lose your option fee that you paid.

This is usually the safest and simplest way to back out of a contract without a headache.

Pro Tip: If you’re even slightly unsure about the house, negotiate a longer Option Period. A few extra days can mean the difference between making an informed decision and making a panicked one.

#2

Another out in the contract you may have is your Financing Contingency. If your contract includes and is contingent on the terms of a Third-Party Financing Addendum, your purchase is contingent upon loan approval. If your financing falls through, you can terminate the contract and get your earnest money back—but you must follow the rules:

You’ll need to notify the seller before the deadline in the addendum.
You’ll need to provide proof that you made a genuine effort to secure financing.

No, you can’t just decide you don’t feel like getting a mortgage anymore. Lenders actually need to deny you for a legitimate reason, such as bad credit, high debt-to-income ratio, or losing your job (though hopefully, that last one isn’t the case!).

#3

As part of the Third Party Financing Addendum, there’s also an Appraisal Contingency.

If the property doesn’t appraise for at least the contract price, you could have an out. Operative word here, Could. if your contract includes the Addendum Concerning Right to Terminate Due to Lender’s Appraisal:

The lender won’t approve financing if the home’s value doesn’t support the loan.

You can renegotiate with the seller or walk away with your earnest money. But the seller does not have to agree to the appraisal price. And if they don’t negotiate, you get the option to walk away within the time allowed in the contract.

But beware! If your contract doesn’t have this addendum, you could be on the hook to cover the shortfall between the appraised value and the sales price.

#4

As a Buyer you can be protected if there are title issues. 

The seller must provide a Title Commitment showing that they have clear ownership. If the title reveals liens, judgments, or legal disputes that the seller cannot or will not resolve, you have the right to walk away. 

Now keep that in mind… it’s the right to walk away. It’s not automatic. If you do want to walk away, there’s a timeline and a process to follow (just like any of the places in the contract that give you the right to cancel), so you’ll want to make sure you’re following the procedure perfectly.

#5

As a buyer you can be protected if there are Title Issues. 

Surveys show property boundaries, easements, and potential encroachments (like your neighbor’s fence politely invading your yard). Or that the new home was built in the property setback. Yeah, I actually had that happen to a buyer of mine. 

If the survey shows issues, and the seller can’t or won’t fix them, you may be able to terminate but you do need to follow the proper procedure to do so.

#6

Another out in the contract is The "Wait, You Didn’t Tell Me That!" And for this one we are talking about the Seller’s Disclosure.
Sellers are required to provide a Seller’s Disclosure Notice listing known defects. 

If they fail to do so:

You can terminate at any time before closing.
If you receive the disclosure late, you have 7 days to cancel.

And sellers, don’t try to hide something. Like that time your house flooded and you had a huge insurance claim because of it. Which some sellers tried to do to some buyers of mine, who found out from the insurance agent when they went to get insurance on the property. That was wild one.

#7

We are moving on to our seventh out in the contract and that’s the "I’m Not Paying for That!" Exit or more formally known as Lender-Required Repairs.

Lenders sometimes require repairs before approving a loan. The seller is not required to make these repairs, but if they decline, the lender will not be able to approve the property for the loan, which would force you out of the contract. If the costs exceed 5% of the purchase price, you can terminate and get your earnest money back.

#8

Our eighth contract out for a buyer is The "Oops, The House Flooded" Clause but the contract would rather call it the Casualty Loss section of the contract.

If the house is damaged or destroyed before closing The seller must restore it to its previous condition. If they can’t, you can terminate and get your earnest money back.

Or, you can accept the damaged house and take the insurance proceeds.
This isn’t common, but hey—life is full of surprises. 

#9

The last contract out we’ll cover for this episode is the "You Didn’t Do What You Said You Would" Clause, also known as Seller Default.

If the seller breaches the contract—by refusing to close, not providing agreed-upon repairs, or failing to meet deadlines—you can terminate and get your earnest money back.

For my final thoughts, Know Your Rights (and Use Them Wisely)

Contracts are serious business, but they’re not unbreakable. If you need to get out of one, make sure you do it legally, ethically, and in a timely manner. And always—always—read the fine print before signing anything.

I covered just some of the ways you can get out of a contract. Depending on the way it’s written and the addenda included, there lots of ways buyers can exit a contract and keep their earnest money.

So you want to make sure you work with a knowledgeable real estate agent who can help you navigate the process.

And if we haven’t met yet, I’m Jennifer Shannon Templeton. I’m a Realtor and Broker Associate with The Crestedge Group at Keller Williams Rockwall and we work with buyers and sellers all over the Dallas-Fort Worth Metroplex. If you’re thinking about making a move in 2025, I’d love to be your real estate resource and earn your business. You can call or text me at 214-803-4444 or send an email to jennifer@thecrestedgegroup.com to get started

And just in case you needed a reminder, I am not a lawyer. This is not legal advice. This content is for general informational purposes only. The views, thoughts, and opinions should not be construed as financial, economic, legal, tax, or other advice. This content is provided without any warranty or guarantee of its accuracy, completeness, timeliness, or results from using the information.