Originally published on April 27, 2025

Buying or selling real estate is one of the largest financial transactions many people will make. So when one party doesn’t follow through, the consequences can be significant. In Texas, real estate contracts are legally binding agreements—and if one side breaches the contract, the other has the right to seek legal remedies.

This article explains what happens when a real estate contract is breached in Texas, who can be held responsible, and what options are available to protect your interests and recover damages.

What Is a Breach of Contract?

A breach of contract occurs when one party fails to perform a required obligation under the agreement. In the context of real estate, this could include:

  • The buyer fails to close on time or refuses to buy the property
  • The seller refuses to transfer title or fails to disclose known defects
  • Either party fails to meet conditions specified in the contract (e.g., financing, inspections, repairs)

Breaches can be minor (partial or technical non-compliance) or material (serious enough to justify termination or legal action).

Common Types of Breach in Texas Real Estate Contracts

  • Failure to Close: The buyer doesn’t secure financing or simply walks away
  • Failure to Disclose: The seller fails to disclose material defects as required by Texas law
  • Failure to Provide Clear Title: Title defects prevent the transfer of ownership
  • Wrongful Termination: One party backs out without a valid contractual reason

Buyer’s Remedies When Seller Breaches

If the seller breaches the contract, the buyer may pursue several remedies under Texas law:

  • Specific Performance: A court order requiring the seller to complete the sale as agreed
  • Return of Earnest Money: Recover the deposit and walk away from the deal
  • Monetary Damages: Compensation for costs incurred (e.g., inspections, appraisals, loan fees, lost value)

Specific performance is often sought when the property is unique or replacement options are limited—such as with a family home or investment opportunity.

Seller’s Remedies When Buyer Breaches

If the buyer breaches the contract, the seller also has options:

  • Keep the Earnest Money: Most contracts allow the seller to retain the deposit as liquidated damages
  • Terminate the Contract: Frees the seller to put the property back on the market
  • Sue for Damages: If the loss exceeds the earnest money, the seller can sue for actual damages (e.g., price reduction, holding costs, market losses)
  • Specific Performance: Rare, but may be requested if the buyer was fully capable of closing and simply refused

In most cases, the contract will specify what remedies are available and whether earnest money is the sole remedy or not.

What Happens to the Earnest Money?

Earnest money is held in escrow and acts as a good faith deposit. If one party breaches the agreement, the other can make a claim on the earnest money.

However, if both parties claim entitlement to the deposit, the title company typically requires written agreement—or a court order—before releasing the funds. This can delay resolution and increase legal costs.

Contract Clauses That Affect Remedies

Texas real estate contracts (especially the TREC forms) often include language that limits or defines the remedies in a breach. Key clauses to watch for include:

  • Termination Option: Allows the buyer to exit the contract within a certain period for any reason
  • Default Remedies: May limit either party to certain remedies (e.g., earnest money only)
  • Financing Contingency: Protects the buyer if they fail to secure a loan
  • Inspection Periods: Allow time for due diligence and potential renegotiation or termination

The enforceability of these clauses depends on the contract language and facts of the case.

Mitigating Damages and Avoiding Escalation

Texas law requires the non-breaching party to mitigate damages. This means taking reasonable steps to reduce losses—for example, promptly relisting the property or terminating the contract when default becomes clear.

Also, early communication and legal advice can often prevent a simple miscommunication from escalating into a full legal dispute.

Litigating a Breach of Contract Case

If the parties cannot resolve the issue informally or through mediation, litigation may be necessary. A lawsuit may involve:

  • Proving the contract and the breach
  • Calculating damages or seeking specific performance
  • Requesting attorney’s fees (available in many breach of contract cases)
  • Obtaining injunctive relief to prevent wrongful sale or transfer

These cases can be complex, especially when title issues, financing delays, or alleged misrepresentations are involved.

When to Contact a Real Estate Attorney

If a real estate contract dispute arises, don’t wait to get legal help. An experienced Texas real estate attorney can:

  • Review the contract and identify your options
  • Negotiate a favorable resolution or release of earnest money
  • Pursue or defend against breach claims in court

Early legal intervention can save time, money, and future litigation.

How Guerra Days Law Group Can Help

At Guerra Days Law Group, we represent both buyers and sellers in real estate breach of contract disputes across Texas. Whether you’re trying to recover earnest money, enforce a sale, or defend against wrongful termination claims, we provide strategic, results-driven legal counsel tailored to your needs.

Contact us today to schedule a consultation and protect your real estate rights.