If a home sale appears to fall through before closing, first determine whether the contract was formally terminated, a contingency was properly exercised, or the closing was merely delayed. The signed agreement, required notices and deadlines, escrow instructions, and state law govern what happens next—including whether earnest money is returned or disputed. Buyers and sellers should preserve written records and avoid treating an informal statement as a completed termination.
First establish what happened
“Fell through” can mean several different things: a party gave written notice under a contract right, financing or another contingency failed, the parties agreed to extend closing, or the scheduled date passed without closing. These events do not have the same effect. A contingency is a contract condition that may allow a party to proceed only if a stated requirement is met; the agreement controls the condition, deadline, and notice procedure. The National Association of REALTORS® (NAR) describes common provisions such as home-sale, home-close, inspection, appraisal, and financing contingencies in its Consumer Guide: Real Estate Sales Contract Contingencies.
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Start with the signed purchase agreement and every addendum or amendment. Find the clause most closely connected to the problem, the closing date, any deadline to object or give notice, and any extension or termination document. Do not assume that a lender denial, a missed closing date, or a buyer’s verbal statement automatically ends the contract.
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Gather the purchase agreement, addenda, amendments, notices, escrow receipt, and relevant inspection, appraisal, title, insurance, or financing communications. Make a dated timeline of the required actions and any notices sent or received. Keep copies of messages and documents, and ask the agent or closing professional to explain the transaction process. If rights or termination are disputed, seek advice from an attorney licensed where the property is located.
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If you are the buyer
Your purchase depends on selling or closing another home
Check whether your agreement has a home-sale contingency or a home-close contingency. NAR distinguishes a provision allowing time to sell an existing property from one allowing time to close a sale already under contract. Identify the applicable deadline and follow the agreement’s notice procedure. If the condition has not been met, ask the agent or closing professional and a local real-estate attorney what steps apply to termination and earnest money.
You want to withdraw for another reason
Review whether an inspection, appraisal, financing, title, insurance, or other contingency still applies and whether its deadline and notice requirements have been satisfied. Do not assume an expired contingency can still be used, or that the deposit is refundable simply because you no longer want to buy. The contract and state law determine the consequences.
If you are the seller
If the buyer says they will not close, preserve the communication and ask for the written notice or contractual basis through the appropriate professionals. Do not promise to keep the earnest money before reviewing the agreement and applicable law.
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If a home-sale or home-close contingency is in effect, NAR says a seller may continue showing the property to prospective buyers. Whether the seller can accept or proceed with another offer—and whether a notice or kick-out procedure applies—depends on the contract. Showing the home does not itself establish that the seller is free to transfer it under a second contract.
If the parties disagree about whether the contract ended or who is entitled to the deposit, consult a local real-estate attorney before signing a release or committing the property to another buyer. Texas REALTORS® specifically cautions Texas sellers about litigation risk when pursuing another sale while termination and earnest money remain disputed; that is Texas professional guidance, not a nationwide rule. Its Earnest Money FAQ was last updated August 25, 2025.
What happens to earnest money?
Earnest money is not automatically awarded to either party when a sale fails. The escrow holder generally keeps the deposit pending closing or resolution of the dispute. If a qualifying contingency was not met and the buyer followed the agreement’s requirements, the buyer may be entitled to a return. If the buyer fails to perform without a valid contractual right to terminate, the seller may claim a remedy. Contract language, notice, timing, escrow instructions, and state law all matter. NAR explains the general role of escrow and contingency-related deposit outcomes in its Consumer Guide: Escrow and Earnest Money.
Ask the escrow holder what signed instructions or other documents it needs, but do not assume the holder can decide which party is legally entitled to the money. In Texas, guidance from Texas REALTORS® describes formal termination as requiring a written agreement—often accompanied by an earnest-money release—or a court order. Procedures elsewhere may differ. The Texas REALTORS® Contracts and Forms FAQ, also last updated August 25, 2025, addresses disputes about responsibility for earnest money.
When to get legal advice
Contact an attorney licensed where the property is located promptly if the other party contests termination, the earnest-money amount is significant, a deadline is imminent or may have been missed, you are considering a second sale, or someone threatens litigation. A broker or closing professional can help explain transaction steps, but a disagreement over contractual rights calls for legal advice specific to the agreement and jurisdiction.
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Protect your move plans while status is unclear
A delayed or failed sale can disrupt a buyer’s next purchase or a seller’s move. NAR’s Consumer Guide: Overcoming Roadblocks to a Sale or Purchase and Consumer Guide: Steps Between Signing and Closing on a Home cover transaction delays and pre-closing coordination. Before changing move arrangements, establish whether the contract is extended, still pending, or terminated.
How to compare the available contract paths
There is no universal choice between extending, terminating, or proceeding. Evaluate the agreement and circumstances using these questions:
- Does a relevant contingency apply, and is it still open?
- Was written notice delivered on time and in the required manner?
- Can the parties agree in writing to an extension or termination?
- What does the contract say about earnest money and default?
- What signed instructions does the escrow holder require?
- What procedures and remedies apply under the law where the property is located?
These are practical questions for reviewing the contract, not a universal legal test. NAR’s consumer guides provide general education; they do not replace the signed agreement or state-specific legal advice.
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