Release of Earnest Money in Texas: What Happens to Your Deposit When a Deal Falls Apart

The release of earnest money in Texas follows the contract: when a deal ends, the contract says which side the deposit belongs to, and the title company pays it out once both the buyer and the seller have signed a release. If one side will not sign, the TREC contract gives the other side a written-demand route with a 15-day objection window, and a party who wrongfully refuses to sign is liable for damages and attorney’s fees after 7 days.

In plain terms: three things have to happen before the earnest money is released. The contract has to say the deposit is yours. Both sides have to sign a release, which in practice the real estate agents handle: the party initiating the termination usually sends the signed release along with its termination notice, and the notice cites the paragraph of the contract that gives it the right to terminate. And if the other side will not sign, you send the title company a written demand, it copies the demand to the other side, and after 15 days with no written objection the title company may pay you. The side that refuses to sign without a contractual reason owes the other side damages, the deposit, attorney’s fees, and court costs.

What earnest money is and how much is usual in Houston is covered in my post on the earnest money contract. This post is about getting the deposit released when a contract ends.

Who decides who gets the earnest money?

The contract does. The One to Four Family Residential Contract (Resale), TREC form 20-19, says where the deposit goes for every way a deal can end, and in most of them it goes back to the buyer.

The simplest case is a termination inside the option period. Paragraph 5B says that if the buyer gives notice of termination within the time prescribed, “any earnest money will be refunded to Buyer.” The option fee stays with the seller, and the deposit comes back to the buyer. How to count the days, the 5:00 p.m. rule, and what happens when no option fee is delivered are all in my post on the Texas option period. Terminate on time and in writing during the option period, and the refund question is already settled.

If the purchase is financed, the Third Party Financing Addendum, TREC form 40-11, adds two more ways out. A buyer who cannot get buyer approval may terminate within the number of days written into the addendum. A buyer whose property approval fails may terminate up to three days before the closing date. In both cases the earnest money is refunded to the buyer, and in both cases the termination notice has to include a copy of the lender’s written statement explaining why. The difference between the two approvals is the subject of my financing contingency post.

The contract gives the buyer several other termination rights, and each one ends with the same sentence: “the earnest money will be refunded to Buyer.” They cover a title commitment that is not delivered on time or a title objection the seller does not cure (Paragraph 6); a Seller’s Disclosure Notice or Seller’s Water Disclosure that is not delivered, or arrives late (Paragraphs 7B and 7I); HOA documents that are not delivered on time under the HOA addendum, TREC form 36-11; lender-required repairs the parties cannot agree to pay for (Paragraph 7E); and storm damage that is not repaired by closing (Paragraph 14), which I walk through in what happens when a hurricane hits before closing.

Then there is default. Paragraph 15 is the only place in the contract that lets the seller keep the deposit:

“If Buyer fails to comply with this contract, Buyer will be in default, and Seller may (a) enforce specific performance, seek such other relief as may be provided by law, or both, or (b) terminate this contract and receive the earnest money as liquidated damages, thereby releasing both parties from this contract. If Seller fails to comply with this contract, Seller will be in default and Buyer may (a) enforce specific performance, seek such other relief as may be provided by law, or both, or (b) terminate this contract and receive the earnest money, thereby releasing both parties from this contract.”

In plain words: a buyer who walks away after the option period with no contractual reason is in default, and the seller may end the contract and keep the deposit. A seller who refuses to close is in default, and the buyer may end the contract and get the deposit back. Default deserves its own post. For now, the point is that Paragraph 15 is where a seller’s claim to the money comes from.

How is earnest money released in Texas?

Paragraph 18 of the contract, titled Escrow, is the part almost nobody reads until a deal dies. It starts by describing the escrow agent, which in a Houston closing is almost always the title company. Under 18A the title company “is not (i) a party to this contract and does not have liability for the performance or nonperformance of any party to this contract,” owes no interest on the deposit, and may wait for funds to clear before paying anyone. It holds the money for both sides and takes neither side.

Paragraph 18B covers the money itself. At closing the earnest money is applied first to the buyer’s cash down payment, then to the buyer’s closing expenses, and anything left over is refunded to the buyer. If the deal does not close, the title company may require a written release of its own liability from everyone before it pays anyone, and it may deduct “authorized expenses,” which the form defines as “expenses incurred by Escrow Agent on behalf of the party entitled to the earnest money that were authorized by this contract or that party.” A survey the buyer ordered through the title company is the usual example in my files.

Paragraph 18C is the release itself. Here is the sequence, step by step:

1. Termination. One side sends a written notice of termination that cites the paragraph of the contract giving it the right to terminate.
2. The release goes with it. The form says “either party or the Escrow Agent may send a release of earnest money to each party and the parties shall execute counterparts of the release.” In practice the real estate agents handle this, and the party initiating the termination sends the signed release along with its termination notice.
3. Both sign, money moves. Once the title company has a release signed by both sides, it pays the party the release names, less any authorized expenses. This is how most Houston terminations end, often within a few business days.
4. One side will not sign. “If either party fails to execute the release, either party may make a written demand to the Escrow Agent for the earnest money.”
5. The title company copies the other side. “If only one party makes written demand for the earnest money, Escrow Agent shall promptly provide a copy of the demand to the other party.”
6. The 15-day objection window. “If Escrow Agent does not receive written objection to the demand from the other party within 15 days, Escrow Agent may disburse the earnest money to the party making demand reduced by the amount of unpaid expenses incurred on behalf of the party receiving the earnest money.”
7. Payment, or a standoff. If no objection arrives, the title company may pay the party that made the demand. If a written objection does arrive, the money stays where it is until both sides sign a release, settle it in mediation, or a court decides.

Two clocks are running here, and they start at different times. The 7-day clock in Paragraph 18D starts when a party receives the request to sign the release. The 15-day clock in 18C belongs to the title company, and the form does not say what day it starts. Most Houston title companies count from the date they send the other side the copy of the demand, so ask yours and put that date on your calendar. The demand itself has to be in writing to the title company; a phone call to the other side’s real estate agent does not start anything. An objection counts only when the title company actually has it. Paragraph 18E says a “Notice of objection to the demand will be deemed effective upon receipt by Escrow Agent.” So if you are the one objecting, send it early and send it in a way that proves the title company received it. Paragraph 21 lists the notice methods and addresses the contract recognizes.

One more timing point. Paragraph 5A lets the deadline for delivering the earnest money and option fee slide past a weekend or a Legal Holiday (the 2026 holiday definition is in the 2026 Texas contract changes). The 15-day and 7-day clocks in Paragraph 18 have no such language. The form is silent, so treat them as calendar days and do not count on an extension.

What if the other side won’t sign the release?

Paragraph 18D is the pressure the contract puts on a party who refuses to sign. Here it is in full, because the exact words are what you will be relying on:

“Any party who wrongfully fails or refuses to sign a release acceptable to the Escrow Agent within 7 days of receipt of the request will be liable to the other party for (i) damages; (ii) the earnest money; (iii) reasonable attorney’s fees; and (iv) all costs of suit.”

That is the current list. Older versions of the contract set the penalty at three times the amount of the earnest money, and plenty of people in Houston real estate still remember it that way. That wording is not in form 20-19, so do not rely on it or threaten with it. What the form provides is actual damages, the deposit itself, attorney’s fees, and court costs.

The word that matters is “wrongfully.” Paragraph 18D punishes refusing to sign a release you had no right to refuse. It does not decide who the money belongs to; Paragraphs 5, 6, 7, 14, 15, and the addenda do that. A seller who refuses to release the deposit after a clean option-period termination is refusing wrongfully. A seller with a real Paragraph 15 default claim who declines to hand the money to the buyer is not. Whether a particular refusal is wrongful is a legal judgment about the facts of your contract, and that question belongs with a Texas real estate attorney.

When can a seller keep earnest money?

In Texas, only when the buyer is in default under Paragraph 15 and the seller chooses to end the contract and keep the deposit as liquidated damages. A buyer who terminates on time under the option period, the financing addendum, a title objection, a late disclosure, an HOA-document failure, or storm damage is not in default, and the contract refunds the deposit in every one of those cases. The buyer a seller can hold to Paragraph 15 is the one who missed the option deadline and then tried to walk, or who cannot close and has no financing-addendum termination left.

What the seller cannot do is keep the money by refusing to sign. The demand route in 18C and the liability in 18D exist to stop exactly that. A seller with a genuine default claim should make a written demand of their own and let the title company copy it to the buyer, which starts the buyer’s 15-day clock to object.

What is the Release of Earnest Money form?

The form Houston real estate agents use is the Texas REALTORS® Release of Earnest Money, TXR-1904. It is one page. Part A has the buyer and seller release each other, any broker, the title company, and the escrow agent “from any and all liability under the aforementioned contract.” Part B tells the title company how to pay out the money, with a line for each amount and payee. The buyer and the seller both sign it, and the brokers sign below them. Read the form’s own notice twice: it releases everyone from all liability under the contract, and the form tells you not to sign it if that is not your intention.

People often look for a “TREC release of earnest money” form. There is no such form. TREC does not publish a release of earnest money form; TXR-1904 is a Texas REALTORS® member form, and its header says it is not authorized for use by non-members. When the seller is unrepresented, the title company will generally have its own release form that does the same job, and under Paragraph 18B the title company can insist on one before paying anybody. Whatever the form, signing it is the ordinary, cooperative way a release of earnest money in Texas ends. The blank contract is on TREC’s page for form 20-19, and the rest of the promulgated forms are on the TREC contracts page.

Why earnest money fights happen, and what the title company will do

The disputes I see in Houston rarely come from bad faith. They come from a deadline the two sides read differently, a termination notice that went out after 5:00 p.m. on the last option day, a seller who believes the buyer’s financing fell through for a reason the buyer controlled, a buyer who believes the seller never delivered a required notice, or both sides simply going quiet after a deal cools off. Each of those is a question the contract answers if someone reads it, and the sooner someone does, the smaller the fight.

When the parties cannot agree, the contract’s next step is Paragraph 16: “Any dispute between Seller and Buyer related to this contract which is not resolved through informal discussion will be submitted to a mutually acceptable mediation service or provider.” The parties split the cost of mediation, and the paragraph preserves each side’s right to seek equitable relief in court. The title company does not decide who is right. Under 18A it is not a party to the contract, and under 18C it may pay out only on a signed release or an unopposed demand. Otherwise it holds the money until the parties agree, a court orders payment, or the title company deposits the funds with a court and steps out of the dispute. The specifics of your situation belong with the title company and a Texas real estate attorney. An escrow holdback, money set aside at closing for a repair, is a different arrangement and is not what this post is about.

How I handle the release of earnest money in Texas

I treat the release as part of the termination, not a separate step. When a buyer client terminates inside the option period, the termination notice cites Paragraph 5B and the signed TXR-1904 goes to the listing side with it, the same day, because a seller who has just lost a contract is far more likely to sign on day one than on day ten. When a seller client has a Paragraph 15 claim, I put the written demand in front of the title company promptly and calendar the 15 days from the date the title company tells me it sent the buyer the copy. I never advise a client to refuse a release they have no contractual grounds to refuse, because Paragraph 18D is written for exactly that client. And every notice, termination, demand, or objection goes out in a form that proves receipt, with the title company copied.

If you are choosing a real estate agent for a purchase or a sale in Houston, Cypress, or Katy, ask how they handle a release, who sends the demand, and what day the 15-day clock starts. I have been a licensed Texas real estate broker since 1989 and have handled many of these releases on both sides. The rest of the questions I would ask any real estate agent are in how to choose a real estate agent, and you can read how I work with Houston home buyers and home sellers.

Earnest money release questions, answered

How long does it take to get earnest money back in Texas?

A few business days when both sides sign the release promptly. If one side will not sign, the contract gives the other side a written-demand route with a 15-day objection window, so a refund by that route takes roughly three weeks from the date the title company sends the other side the copy of the demand. If the other side objects in writing, the money stays with the title company until the parties agree, mediate, or a court decides.

Can a seller keep earnest money in Texas?

Only when the buyer is in default under Paragraph 15, which lets the seller end the contract and keep the earnest money as liquidated damages. A buyer who terminates on time under the option period, the financing addendum, a title objection, a late disclosure, or storm damage is not in default, and the contract refunds the deposit. A seller cannot keep the money just by refusing to sign the release.

What happens if the seller refuses to sign the release of earnest money in Texas?

The buyer makes a written demand to the title company under Paragraph 18C. The title company copies the demand to the seller, and if the seller does not object in writing within 15 days the title company may pay the buyer. Under Paragraph 18D, a party who wrongfully refuses to sign a release within 7 days of receiving the request is liable for damages, the earnest money, reasonable attorney’s fees, and all costs of suit. Whether a refusal is wrongful is a question for a Texas real estate attorney.

Is there a TREC release of earnest money form?

No. TREC does not publish a release of earnest money form. The form Texas real estate agents use is the Texas REALTORS® Release of Earnest Money, TXR-1904, a one-page member form signed by both parties that releases everyone from liability under the contract and tells the title company how to pay out the deposit. Title companies have their own release forms for transactions without a REALTOR® involved.

Does a real estate agent decide who gets the earnest money?

No. The contract decides, the parties sign the release, and the title company pays it out. What a good real estate agent does is send the signed release with the termination notice the same day, send the written demand promptly if the other side stalls, calendar the 15 days, and keep every notice in a form that proves receipt. Compensation for that representation is set out in a written buyer representation agreement before showings begin.

Last updated: October 2026 · Reflects TREC contract 20-19 (mandatory July 1, 2026), Paragraphs 5, 6, 7, 14, 15, 16, 18 and 21, the Third Party Financing Addendum 40-11, the HOA addendum 36-11, and Texas REALTORS® form TXR-1904. General information, not legal advice; for your own contract, talk to the title company holding the deposit or a Texas real estate attorney.

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