01
Can I back out during the option period and get my earnest money back?
Paragraph 5B of the Texas resale contract, TREC Form 20-19, gives the buyer an unrestricted right to terminate. Notice goes to the seller within a negotiated number of days after the effective date. The cutoff is 5:00 p.m. local time on the date specified. Any earnest money is refunded. The option fee is not.
What a strong answer sounds like
A good answer names the date and the hour. 'The option period ends Friday at 5:00 p.m. local time, and written notice has to reach the seller by then.' In Williamson County, buyers have been regaining leverage, so the option period is room to reassess.
Red flag
A bad answer treats the option period as a mood rather than a date. Watch for 'you have a few days to think' with no hour attached. Watch for a plan to call the agent instead of sending written notice to the seller. A late call does not stop the clock.
02
What happens to my earnest money if the lender will not approve my loan?
Paragraph 2A of the Third Party Financing Addendum, TREC Form 40-11, covers a buyer who cannot obtain buyer approval. That buyer may terminate within a negotiated number of days after the effective date. The notice of termination travels with a copy of the lender's written statement setting out the reasons. The earnest money is refunded.
What a strong answer sounds like
A good answer names the date in the addendum and the paperwork that goes with it. 'Buyer approval is due by the date written in Paragraph 2A, and a decline comes with a written statement from the lender listing the reasons.' The statement goes in with the notice.
Red flag
A bad answer says a loan falling through cancels a Texas contract on its own. It does not. Watch for a verbal decline treated as notice. Watch for a termination sent with no written statement from the lender. Paragraph 2A wants both, inside the negotiated window.
03
Can I get my earnest money back if the appraisal comes in low?
Paragraph 2B of TREC Form 40-11 covers the property rather than the buyer. It applies when the lender decides the property does not satisfy its underwriting requirements. That includes the appraisal, insurability and lender required repairs. The buyer may terminate on or before the 3rd day before the closing date. Notice and the lender's written statement are required, and the earnest money is refunded.
What a strong answer sounds like
A good answer counts backward from the closing date. 'Closing is the 30th, so property approval has to be settled by the 27th.' In Georgetown, Round Rock and Liberty Hill, where T. Kerr Property Group works, those days are the working room.
Red flag
A bad answer says a low appraisal cancels the contract by itself. It does not. Watch for a wait and see plan that drifts toward closing week. The Paragraph 2B window shuts on the 3rd day before the closing date, and the right goes with it.
04
What if a title problem on the commitment never gets fixed?
Paragraph 6D of the Texas resale contract, TREC Form 20-19, covers title objections that go uncured. If the objections are not cured within the cure period, the buyer has a choice. The buyer may terminate within 5 days after the cure period ends and receive the earnest money back. The buyer may also waive the objections. Paragraph 6B is a separate exit when the commitment and exception documents arrive late.
What a strong answer sounds like
A good answer treats the end of the cure period as a trigger date. 'Objections went in, the cure period closes on the 12th, and the termination window runs 5 days past it.' A good answer also names who is reading the exception documents before that date.
Red flag
A bad answer says title problems always clear before closing. Some never get cured. Watch for a promise to sort it out at the table while the 5 day window runs out. Paragraph 6D ties the buyer's right to that window.
05
What if the seller will not make the repairs the lender is demanding?
Paragraph 7E of the Texas resale contract, TREC Form 20-19, deals with lender required repairs. The buyer may terminate and receive the earnest money if those repairs are not agreed. The same right applies if they exceed 5 percent of the sales price. Paragraph 7B(2) is a separate exit. The buyer may terminate if the Seller's Disclosure Notice is not received.
What a strong answer sounds like
A good answer puts a dollar number against the 5 percent line. 'The lender wants the roof decking replaced, the bid is above 5 percent of the sales price, so Paragraph 7E is live.' A good answer also names the date the Seller's Disclosure Notice arrived, because a 7 day right runs after delivery.
Red flag
A bad answer blends lender required repairs with repairs the buyer simply wants. Paragraph 7E covers the ones the lender requires. Watch for a quiet push to pay for them to keep the deal moving. Nobody is checking the 5 percent line in that version.
06
Can I get my earnest money back if the seller backs out?
Paragraph 15 of the Texas resale contract, TREC Form 20-19, sets out what happens when the seller fails to comply. The seller is then in default. The buyer may enforce specific performance, seek other relief provided by law, or both. The buyer may also terminate and receive the earnest money. The choice belongs to the buyer.
What a strong answer sounds like
A good answer lays out both branches before the buyer picks one. 'Terminating returns the earnest money. Specific performance asks a court to make the seller close.' A good answer also puts the choice in writing.
Red flag
A bad answer stops at the line that the contract returns the money. Paragraph 18 lets the escrow agent require a written release of liability from all parties first. A party who wrongfully refuses to sign a release acceptable to the escrow agent within 7 days of the request is liable. That liability covers damages, the earnest money, reasonable attorney fees and all costs of suit.
This article is general information about the Central Texas market and is not legal, tax or financial advice. Statutes, rates, deadlines and district rules change. Confirm anything that affects a decision with a licensed attorney, a tax professional, the Williamson County Tax Assessor Collector or the Williamson Central Appraisal District before acting on it.
