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Please upgrade your browser or activate Google Chrome Frame to improve your experience. Earnest money is not necessary to make an otherwise accepted offer into a valid contract. Earnest money is a buyer-performance item required to be deposited after a contract is fully executed.

A contract could become effective even if no earnest money is required in the agreement. The deposit of earnest money is a buyer obligation once the contract is effective.

EARNEST MONEY DISPUTES IN TEXAS RESIDENTIAL TRANSACTIONS

Since the parties haven't agreed on the termination of the contract and no judge has decided the issue, you shouldn't give either party advice about the termination of the contract.

Tell your seller to get advice from his attorney concerning the risks of proceeding with a subsequent sale of the property without a final settlement of the issue of contract termination.

The seller's primary goal should be to have formal termination of the contract. That ensures he can put the property back on the market and sell it to someone else without risking a lawsuit that could stop a subsequent sale of the property.

A contract can be formally terminated if both parties agree to terminate—usually in writing with a release-of-earnest-money form—or if a judge orders the contract to be terminated.

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Because of the potential risk of an adverse ruling by a judge concerning the seller's right to terminate the contract, title companies often refuse to open a second escrow file on a property where the first contract has not been formally terminated. Remember that Texas Real Estate Commission contracts now require buyers and sellers to participate in mandatory mediation to resolve disputes before going to court.

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The material provided here is for informational purposes only and is not intended and should not be considered as legal advice for your particular matter. You should contact your attorney to obtain advice with respect to any particular issue or problem.

Applicability of the legal principles discussed in this material may differ substantially in individual situations.

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Careers in real estate TAR governance Officers Executive Board Board of Directors Bylaws Local associations Association jurisdictions Map of TAR regions Local board roster. Updated March 4, No. He gave me his earnest money check and now the contract is fully executed.

When do I have to deposit the earnest money with the escrow agent named in the contract? What should I do?

Updated June 30, Since the parties haven't agreed on the termination of the contract and no judge has decided the issue, you shouldn't give either party advice about the termination of the contract.

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