You put down earnest money in good faith. Then the seller backs out. Now what?  

Most buyers assume they'll get their deposit back — and in many cases, they will. But what your contract says about seller default determines more than just your refund. It determines what options you actually have. 

In 2026's Dallas-Fort Worth market, this situation may occur more frequently in certain segments of the market. With homes sitting an average of 35 to 55 days and a sold-to-list ratio hovering around 92%, sellers can no longer count on a quick replacement buyer.¹ That shift means buyers who put down earnest money in good faith may have greater negotiating leverage — but only if they understand what their contract actually says about default and remedies. 

Here is what Texas buyers need to know. 

What the TREC Contract Says About Seller Default 

The standard TREC One to Four Family Residential Contract governs most residential real estate transactions in Texas. Paragraph 15 is the default provision — and it applies to both buyers and sellers. 

Under Paragraph 15, if the seller fails to comply with the contract, the seller is in default and the buyer may choose one of two paths: enforce specific performance and seek other relief available under law, or terminate the contract and receive the earnest money as liquidated damages.² These two options are generally mutually exclusive — meaning a buyer typically must choose one path, not pursue both simultaneously. Which path makes more sense depends on the facts of the transaction and the contract terms. 

Common examples of seller default under a Texas real estate contract include refusing to close after accepting a higher offer, failing to complete agreed-upon repairs before the closing date, being unable to deliver a clear title, or misrepresenting a material condition of the property. 

The Two Remedies — and When Each Applies 

How the Earnest Money Release Process Works 

When a dispute arises over earnest money, the title company holding the funds will not release them unilaterally. Under TREC Paragraph 18, the title company requires either a signed mutual release from both parties or a court order before disbursing the funds.² 

If the parties cannot agree on a mutual release, either party may make a written demand to the escrow agent. Once a demand is made, the other party has 15 days to submit a written objection. If no objection is received within that window, the escrow agent may release the funds to the party who made the demand. Understanding this process — and acting promptly — matters when time and money are both at stake. 

To illustrate how this plays out in practice, consider a buyer in Southlake who is under contract on a home listed for 47 days. After the option period expires, the seller receives a higher all-cash offer and refuses to close. The buyer has already paid for an inspection, an appraisal, and a mortgage rate lock. The earnest money is held by the title company, and the seller is refusing to sign a mutual release. 

In this situation, the buyer's options — whether to make a written demand under Paragraph 18, pursue specific performance, or evaluate other remedies depend on what the contract says and the specific facts involved. An attorney can evaluate which path is appropriate based on those terms. 

This is a fictional example created for educational purposes only. It does not represent any actual case or client. This content does not constitute legal advice. 

Why Contract Language Matters Before a Dispute Arises 

Earnest money dispute outcomes are largely shaped by what the contract says, not by what either party assumed when they signed it. Texas courts generally enforce the written terms of a real estate contract. Oral agreements and informal communications are not substitutes for clear contract language, and a right or remedy that is not expressly stated in the signed contract is likely not enforceable. 

The Property Protection Package offered by The Keller Firm PLLC includes a review of the purchase contract and closing documents — including the default provisions, remedy clauses, and escrow instructions that govern what happens if a party fails to perform. Understanding those terms before a dispute arises can help you navigate any future problems. 

If you have questions about a contract dispute or want to understand your rights under a Texas real estate contract before closing, an attorney can evaluate your situation. Contact us at 214-775-0817 or visit kellerfirm.com. 

Disclaimer: This website is for informational purposes only and does not constitute legal advice. Do not act or refrain from acting based on anything you read on this site. Use of this site or communication with The Keller Firm does not create an attorney-client relationship.

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