Can I Back Out of My Contract? Texas and the Termination Option Period

By
Real Estate Agent with Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com 0480809

Can I back out of my contract? In the Texas Residential contracts, the answer is, "It Depends..."

Are you the Buyer or the Seller? The simple answer is that Buyers have ways out of the contract. Sellers do not have ways out of the contract.

Buyers have many ways they can terminate a residential real estate contract in Texas. I'll go over a few in a series of posts.

The Termination Option Period is very important. Many states have an instant "inspection period", but Texas does not. Don't get me wrong, in Texas, you can get inspections on any property whenever you want, but you can't just back out of a contract because of the inspections. You need a "Termination Option Period". This is a negotiated period of time, usually 5-10 days, for a negotiated amount of money, $100-200, for the buyer to purchase the "unrestricted right to terminate" the contract for any reason they want.

With their "unrestricted right to terminate", a buyer can back out because of the inspections, because the sun comes through a window the wrong way, because they decide the barking dogs next door are obnoxious, or because they woke up on the wrong side of the bed that morning and decided they didn't want the houe anymore.

They will retain their earnest money if they terminate during the time they negotiated. If they negotiated 7 days and they terminated on day 5, they lose the price it cost them for the period of time, and they lose the money they spent on inspections. They get their earnest money back.

If they negotiated 7 days, and decided to terminate the contract on day 10, they would not retain their earnest money as they're outside their time frame... except there are other ways out.  Come back and read more...

Disclosure Notice Period

**Are You Packed Yet?**

donna harris Realtor Austin TX blog

Donna Harris, REALTOR®
RE/MAX Austin Skyline
www.DonnaHomes.com

Donna@DonnaHomes.com
austin-texas-homes-for-sale.com

Austin TX Real Estate and the surrounding areas of Lakeway, Bee Cave, West Lake Hills, CedarPark, Round Rock, Spicewood, Circle-C, Steiner Ranch, and everywhere in between... Hill Country Austin TX Real Estate and beyond. Whether you're buying or selling an Austin home, I'll be with you every step of the way. 

For real time Austin TX listings,click here.

 

** Multi-Million Dollar Producer Year after Year **
** Platinum Top 50 Finalist 2011 out of almost 9000 agents in Austin TX**
** Five-Star Professional 2011 & 2012 **
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Copyright© 2012 By Donna Harris, All Rights Reserved. You may re-blog with links back to this post.
* Can I Back Out of My Contract? Texas and the Termination Option Period
* was first published on donnahomesblog.com.

 

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Ambassador
1,069,491
Jerry Newman
Brown Realty, 210-789-4216,www.JeremiahNewman.com - San Antonio, TX
Texas REALTOR, San Antonio Military Relocation

Hi Donna. I always recommend to my buyers to get that "Option Period" with every offer. Investors are the only ones that I have seen, who opt not get one because they normally want a quick close.

May 31, 2012 05:55 AM #1
Rainmaker
288,301
Tim Bradley
Contour Investment Properties - Jackson Hole, WY
Commercial Real Estate Expert in Jackson Hole, WY

Nice blog topic...I look forward to seeing how Texas might differ from Wyoming in the typical clauses you can use to kill a contract.

May 31, 2012 07:32 AM #2
Ambassador
1,611,572
Harry F. D'Elia
Real Estate and Beyond, LLC - Phoenix, AZ
Investor , Mentor, GRI, Radio, CIPS, REOs, ABR

It is best to educate the buyer if they do need to back out of the contract-just lose earnest deposit.

May 31, 2012 08:31 AM #3
Ambassador
1,151,159
Bryan Robertson
Intero Real Estate - Los Altos, CA
Broker, Author, Speaker

It's always nice to have an exit if the purchase doesn't work out.  Buyers in CA has a 3-day right to cancel a contract for any reason.  They may have longer with financing or property condition contingencies.

May 31, 2012 10:04 AM #4
Rainmaker
494,614
Robert L. Brown
www.mrbrownsellsgr.com - Grand Rapids, MI
Grand Rapids Real Estate Bellabay Realty, West Mic

We use the inspection period as an out for our clients here. Trust me all my buyers ask about it prior to writing an offer.

May 31, 2012 10:53 AM #5
Rainmaker
800,752
Evelyn Kennedy
Alain Pinel Realtors - Alameda, CA
Alameda, Real Estate, Alameda, CA

Donna:

Interesting how different state are.  Bryan has already told you about how termination of contract works.  There is no termination option.  Inspections, financing and appraisal are all contingencies a buyer may elect to have in the contract.

May 31, 2012 11:21 AM #6
Ambassador
2,264,211
1 ~Judi & Don Barrett & Chassy Eastep - Integrity
Integrity Real Estate Services 118 SE AVE N, Idabel, OK 74745 - Idabel, OK
BS Ed, Integrity Real Estate Services -IDABEL OK

Donna, Information that anyone entering into a contract in Texas needs to know.

May 31, 2012 11:39 AM #7
Rainmaker
1,316,820
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Donna -- do you ever recommend that the seller get an inspection prior to putting the home on the market, so they can address any issues and control the cost of the fix? It seems this may be a good idea in TX given that this option can exercised by the buyer.

May 31, 2012 12:54 PM #8
Ambassador
1,398,022
Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Here where I am in PA we don't have such an option period...

May 31, 2012 02:36 PM #9
Rainmaker
589,190
Phil Leng
Retired - Kirkland, WA
Phil Leng - Retired

Hi Donna,

Another very instructive post.

Thanks for sharing

Phil

May 31, 2012 08:07 PM #10
Rainmaker
1,456,447
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

Jerry, Same here, but it's still not often. Many investors still want to see what's going on and have an option.

Tim, They're coming...

Harry, It's not good to "just lose earnest money" if it's a sizeable amount.

Bryan, We only have a 3 day right for anything on a refi, but I think that's nationwide.

Robert, But do you have to purchase your inspection period, or is it automatic?

Evelyn, Appraisal contingencies are only automatic for FHA loans in Texas.

Judi, Yep!

Joan, Yes, I recommend it. Only one seller has ever done it. They don't mean too much as a buyer is still going to get their own as each inspector will find different things.

Erica, Maybe you could propose it?

Phil, Thanks!

Jun 01, 2012 12:04 AM #11
Rainmaker
571,412
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Donna,  Paying to procure a legal right ?  Why should a buyer have to pay anything to have access to this option ?  Have a terrific weekend !

Jun 01, 2012 03:17 AM #12
Anonymous
Jennifer

I'm a seller in Texas and I already signed the contract but not even 24 hours later had my realtor request a termination due to a death in my family. Unfortunately the buyers realtor is not playing nice and says that they will be going through because they received the executed contract. Please help!

May 18, 2015 02:40 PM #21
Anonymous
Diana

Hello! Not sure if anyone is still reading this thread. My option period ends today. I signed and submitted a termination of contract TREC No. 38-5, TAR 1902. I have confirmed with my agent that the seller's realtor has received the form, but she has not signed it. Does it need to be signed to be legal and have contract terminated? Also, how will this affect my earnest money? (I purchased the option fee for $150 for 7 days on August 2nd).

Thanks.

Aug 09, 2016 04:46 AM #22
Anonymous
Diana

I submitted termination yesterday, August 9, 2016.

Aug 09, 2016 04:47 AM #23
Anonymous
Diana

August 8th! Sorry...

Aug 09, 2016 04:48 AM #24
Rainmaker
1,456,447
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

You didn't give me any contact information, so I'll respond here... If you submitted the form you stated you did, it does NOT require the seller to sign. Earnest money would automatically get returned to you once you submit that form to the title company to release the money. Sellers aren't required to sign that form because they cannot control your termination if it's done within the options listed.

Aug 09, 2016 06:09 AM #25
Anonymous
Dee

Hello...I recently purchased a home and the contract is executed and we are supposed to close on 9/30...now the seller is hinting at wanting to "breach" the contract...they were under court order to sell the house due to divorce...should I be worried that they won't move out by closing? Do I need a real estate attorney? I'm in Texas

Sep 11, 2016 05:33 AM #26
Rainmaker
1,456,447
Donna Harris
Donna Homes, powered by JPAR - TexasRealEstateMediationServices.com - Austin, TX
Realtor,Mediator,Ombudsman,Property Tax Arbitrator

You didn't give me any contact information, so I can only hope you check back here for a response. I'm not an attorney, so my views are strictly from that as an agent with 16 years of licensure... No matter the situation, you always run the risk of the sellers not moving out on time. Since this is court ordered, hopefully the judge has spelled out what will happen if they don't comply with the contract. There is nothing you can do with a "worried that they won't move out by closing..." You can't do anything until that moment comes. Also, you need to realize that in Texas, the seller can still occupy the house at closing. The seller, if you marked "upon closing and funding" on the contract, needs to be out by funding, which can be a couple of hours after closing.

Yes, contact an attorney so you have one on standby, but there's nothing that can be done right now. He might want to write a letter that spells out expectations like there is an expectation that the seller will be out of the house according to the contract, but it's not smart to throw out empty threats of what you would do if they aren't out because you don't know for sure they are even thinking about not being out... breathe and do what you need to do to close your side. Let the listing agent and judge take care of the seller, right now.

Sep 12, 2016 06:06 AM #27
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Donna Harris

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