One Page, Eight Boxes, and a Lot of Ways to Lose an Argument
Most Texas terminations come down to a single page: TREC’s Notice of Buyer’s Termination of Contract, form 38-8. Eight checkboxes and a signature line. It looks like the easiest form in the file.
It isn’t.
Every box points somewhere else: a paragraph of the contract or one of the addenda. Each of those paragraphs has its own deadline, its own conditions, and sometimes something that has to ride along with the notice. Check the wrong box, skip the attachment, or hit send at 5:07 p.m., and a clean termination turns into a fight over the earnest money.
This one’s for the people doing the work: agents filling out and delivering the notice, and TCs who own the calendar behind it. It’s written from the current forms: the One to Four Family Residential Contract (20-19), the Third Party Financing Addendum (40-11), the HOA addendum (36-11) and the appraisal addendum (49-1).
Not legal advice. The form itself tells the parties to consult an attorney before signing, and it means it.
The Eight Boxes at a Glance
| Box | Termination right | Where it comes from | Deadline | Attach |
|---|---|---|---|---|
| 1 | Unrestricted right (option period) | Contract ¶5B | Last day of the option period, by 5:00 p.m. local time | — |
| 2 | Buyer can’t get Buyer Approval | Financing addendum ¶2A | Within the days stated in ¶2A after the Effective Date | Lender’s written statement of reasons |
| 3 | Property doesn’t get Property Approval | Financing addendum ¶2B | On or before the 3rd day before the Closing Date | Lender’s written statement of reasons |
| 4 | HOA subdivision information | HOA addendum ¶A | Within 3 days after receiving the Subdivision Information, or before closing if it never arrives | — |
| 5 | Seller’s Disclosure Notice delivered late | Contract ¶7B(2) | Within 7 days after receiving the disclosure, or before closing if it never arrives | — |
| 6 | Appraisal below the stated amount | Appraisal addendum ¶(3) | Within the days stated in the addendum after the Effective Date | Copy of the appraisal |
| 7 | Title or survey objections not cured | Contract ¶6D | Within 5 days after the end of the Cure Period | — |
| 8 | Any other right | The paragraph you cite | Per that paragraph | Per that paragraph |
Box by Box
Box 1: The Option Period (¶5B)
This is the one everybody knows: the buyer paid for the unrestricted right to walk away, and now they’re using it. Straight from the contract, notices “must be given by 5:00 p.m. (local time where the Property is located) by the date specified.” And ¶5E makes time of the essence. Not 5:15. Not “we sent it as soon as the client called back.”
Check the option fee before you check the box. Under ¶5D, if no option fee was stated, or the buyer didn’t deliver it on time, there’s no unrestricted right to terminate. Everyone assumes the fee went in on day one. Confirm it. Get the escrow receipt into the file early, not on day ten when you need it.
Count from the Effective Date. That’s the date the broker wrote in at final acceptance. Not the day the buyer paid the option fee, and not the day everybody “agreed.”
Boxes 2 and 3: Financing (Third Party Financing Addendum)
Two different approvals, two different clocks, and people blur them together constantly.
- Buyer Approval (¶2A) is about the buyer: assets, income, credit, and loan terms being available. If the contract is subject to it, the buyer can terminate within the number of days written in ¶2A after the Effective Date. Miss that window and, straight from the addendum, “the contract shall no longer be subject to the Buyer obtaining Buyer Approval.” Gone.
- Property Approval (¶2B) is about the house meeting the lender’s underwriting: appraisal, insurability, lender-required repairs. The buyer can terminate on or before the 3rd day before the Closing Date. If they don’t, Property Approval is deemed obtained.
Both require a copy of the lender’s written statement setting out the reasons. Not a text from the loan officer. Not “the lender said no.” The written statement, delivered with the notice.
FHA and VA are different. ¶4 of the financing addendum (the required FHA/VA provision) has its own rules, and the 3-day requirement in ¶2B doesn’t apply to it. If that’s the basis, it isn’t box 3. Use box 8 and cite the paragraph.
Box 4: HOA Subdivision Information (HOA Addendum ¶A)
Once the Subdivision Information arrives (restrictions, bylaws, rules and the resale certificate), the buyer has 3 days after receiving it to terminate, or until closing, whichever comes first. If it never shows up in the cases where it’s owed, the buyer can terminate any time before closing.
TCs, the whole deadline is the receipt date. Write down exactly when the buyer received the documents and how. If you can’t prove the date, you can’t prove the deadline.
Box 5: The Seller’s Disclosure Showed Up Late (¶7B(2))
This only applies when ¶7B box 2 was checked: the buyer didn’t have the Seller’s Disclosure Notice when they signed. Once it’s delivered, the buyer can terminate for any reason within 7 days after receiving it, or before closing, whichever comes first. Never delivered? The buyer can terminate any time before closing.
New in 20-19: ¶7I gives the same kind of 7-day right for the Seller’s Water Disclosure (groundwater and surface water rights). There’s no box for it on 38-8 yet, so use box 8 and cite ¶7I. More on that in well and septic transactions.
Box 6: The Appraisal Addendum’s Extra Right (49-1, ¶(3))
This box only exists if the parties used TREC’s Addendum Concerning Right to Terminate Due to Lender’s Appraisal and checked paragraph (3). That gives the buyer an extra right to terminate within the stated days after the Effective Date if the appraised value comes in below the stated amount, and the buyer must deliver a copy of the appraisal to the seller.
If they checked (1) Waiver or (2) Partial Waiver instead, the buyer gave up some or all of their appraisal-based termination under ¶2B. Know which box is checked before the appraisal comes back, not after everyone’s upset about the number. And remember the addendum can’t be used with FHA or VA financing.
Box 7: Title or Survey Objections Nobody Fixed (¶6D)
The buyer objected to something in the title commitment or survey, on time. The seller had a 15-day Cure Period and didn’t cure it. Now the buyer has 5 days after the Cure Period ends to terminate, or waive. Do nothing, and the objections are deemed waived.
For TCs: this one’s a chain, not a date. Commitment, exception documents and survey received; objection sent; seller received it; cure period ends; plus 5 days. The closing date extends as needed during the cure. Calendar every link, because one missing date breaks the whole chain.
Box 8: Everything Else
Box 8 covers any other termination right. Name the paragraph, every time. The usual suspects:
- ¶7I, the Seller’s Water Disclosure
- ¶4C, natural resource leases
- ¶7E, lender-required repairs costing more than 5% of the sales price (and if the parties simply can’t agree on who pays for lender-required repairs, ¶7E terminates the contract on its own; nobody checks a box)
- ¶14, casualty loss
- The financing addendum’s FHA/VA ¶4
Delivering It So It Counts
- In writing, to the addresses in ¶21. Notices are effective when mailed, hand-delivered, sent by overnight courier, or transmitted electronically to the other party or their agent at the addresses in the contract. Not whichever email you found in an old thread.
- Every buyer signs. Two buyers on the contract means two signatures on the notice.
- Attachments go with the notice: the lender’s statement for boxes 2 and 3, the appraisal for box 6.
- Keep proof of the time. On an option-period termination, 4:58 p.m. and 5:02 p.m. are two completely different outcomes. Save the sent email with its timestamp, or the delivery confirmation.
Terminating Doesn’t Move the Money
The form says it in plain words: “This notice is not an election of remedies. Release of the earnest money is governed by the contract.” The termination is one step. Getting the earnest money out of escrow is another.
Under ¶18, either party (or the escrow agent) sends a release of earnest money for both sides to sign. If one side won’t sign, the other can make a written demand on the escrow agent. If no written objection arrives within 15 days, the escrow agent may disburse. And a party who wrongfully refuses to sign a release within 7 days of receiving it can end up owing damages, the earnest money, attorney’s fees and costs (¶18D).
That’s what the contract says. Here’s what we’ve observed. When one side makes a written demand under ¶18, the title company passes it along to the other side, and sometimes the process plays out the way the contract describes. What we haven’t seen is a title company decide on its own that disbursing to one side is the right call. Escrow agents are holding someone else’s money, people today are quicker to sue when they feel wronged, and nobody wants to end up named in that suit. So in our experience, most files sit until everyone signs. When the parties can’t get there, a title company may file an interpleader: deposit the earnest money with the court and let the parties resolve it there.
Past this point, it’s legal territory. Whether a demand is appropriate, whether a termination was valid, who’s entitled to the money: those are questions for a real estate attorney, not your agent, your TC or a blog post. This is our observation from working files, not legal advice.
For the file itself, plan for the release. The signed release is the finish line.
On an option-period termination, the option fee stays with the seller and the earnest money is refunded to the buyer (¶5B). Don’t let anyone on either side mix those two up.
The TC’s Termination Checklist
- Identify the box, and confirm the right actually exists. Option fee delivered on time? Appraisal addendum paragraph (3) checked? Disclosure delivered after the contract?
- Confirm the deadline from the source paragraph, and the date the clock started
- Gather attachments: the lender’s statement (boxes 2 and 3) or the appraisal (box 6)
- Get every buyer’s signature and deliver per ¶21 before the deadline. Save the timestamp.
- Tell the title or escrow officer and the lender, and cancel inspections, repairs and anything else on the calendar
- Start the earnest money release and chase every signature. If the parties dispute who gets the money, that’s a conversation for their attorneys, not the TC.
- Close out the file: termination date, delivery method and box, in the notes, for whoever looks next
The Honest Take
Most earnest money fights don’t start with a bad buyer or a greedy seller. They start with a sloppy notice: the wrong box, a missing lender letter, a notice sent to an old email address, or a 5:20 p.m. “I thought we had until end of day.”
None of that is hard. It’s just unforgiving. The form doesn’t care that the client was slow to call back, and the other side’s agent will absolutely notice the timestamp.
That’s the whole job of a good TC on a termination: know which right you’re actually using, prove the deadline, and make the notice boring. Boring notices don’t end up in mediation.
Agents: if you’d rather have someone else watching every one of these clocks on every file, that’s exactly what we do across Texas, with a dedicated TC and a trained backup on each file.
TCs: our TC Training Course walks through the full contract-to-close workflow, terminations and earnest money releases included.
