Originally published on January 8, 2023

In Texas, real estate contracts are legally binding agreements between buyers and sellers. When one party fails to meet their obligations—whether it’s closing on time, disclosing required information, or providing clear title—a breach of contract may occur. The consequences can be severe, but so are the legal remedies available to the non-breaching party.

This article outlines what constitutes a breach of a real estate contract in Texas and what options are available for resolution or compensation.

Common Types of Breach in Real Estate Contracts

A breach can occur in many ways, including:

  • Failure to close: A party fails to complete the transaction by the closing date.
  • Failure to deliver clear title: The seller cannot provide marketable title free of encumbrances.
  • Failure to disclose: The seller omits required disclosures about the property’s condition.
  • Backing out improperly: A party withdraws without valid justification under the contract terms.
  • Failure to perform contractual duties: Such as not completing agreed-upon repairs.

Remedies for the Non-Breaching Party

The non-breaching party typically has several legal remedies depending on the nature and extent of the breach:

1. Specific Performance

This remedy forces the breaching party to fulfill their contractual obligations. Courts may grant specific performance when monetary damages are insufficient—especially when the property is unique or hard to replace.

2. Termination and Return of Earnest Money

If the contract permits, the buyer or seller may terminate the agreement and request the return of any earnest money. The escrow agent typically requires written instructions from both parties or a court order to release the funds.

3. Monetary Damages

The injured party may sue for actual damages, including:

  • Inspection, appraisal, and loan costs
  • Price difference if a replacement property is more expensive
  • Loss of value or delay-related expenses

To recover, the damages must be proven and directly related to the breach.

4. Liquidated Damages

Many Texas real estate contracts include a liquidated damages clause allowing the seller to retain the buyer’s earnest money if the buyer breaches. This serves as a pre-agreed remedy and may prevent further claims.

Buyer’s vs. Seller’s Rights in a Breach

If the Seller Breaches

Buyers can seek:

  • Specific performance to force the sale
  • Reimbursement of costs like appraisals and loan fees
  • Return of earnest money
  • Damages for price differences or lost opportunity

If the Buyer Breaches

Sellers can typically:

  • Keep the earnest money (if allowed by contract)
  • Seek damages for lost sale or reduced property value
  • Relist the property and sue for resale losses

Role of the Earnest Money

Earnest money acts as a good-faith deposit. If the buyer breaches without a valid excuse (such as failing a financing contingency), the seller may be entitled to keep the deposit as liquidated damages.

If there is a dispute over who should receive the funds, the title company may hold the money in escrow until the parties agree or a court rules on the issue.

Dispute Resolution Options

  • Mediation: Required by many Texas real estate contracts as a first step
  • Arbitration: Sometimes required by contract, quicker and more private than litigation
  • Lawsuit: Filed in county or district court depending on the amount and nature of the claim

How to Avoid Breach Disputes

  • Work with an experienced real estate attorney
  • Understand all terms before signing the contract
  • Follow deadlines and contingencies carefully
  • Keep written records of all communications and obligations

How Guerra Days Law Group Can Help

At Guerra Days Law Group, we handle breach of contract disputes for both buyers and sellers throughout Texas. Whether you’re facing a failure to close, a broken promise, or a dispute over earnest money, we can help you navigate the situation, enforce your rights, and recover what you’re owed.

Contact us today to schedule a consultation and get the support you need to resolve your real estate contract dispute quickly and effectively.