I read an interesting post on Facebook the other day. There was a discussion about the delivery of the earnest money being required before a contract becomes binding.
I’m going to argue that a Texas contract becomes binding when it’s signed by all parties, executed, and all parties have received notice.
I base this on several things:
The Texas Property Code (TPC) requires delivery of the earnest money by the close of business on the second business day after execution unless otherwise stated in the contract.
The delivery of earnest money to the escrow officer is a performance issue under the contract. This is clearly spelled out in a Texas 1 to 4 Family Residential Resale Contract. Paragraph 5 reads, “If Buyer fails to deposit the earnest money as required by this contract, Buyer will be in default.” I don’t know how you can be in default if there is no contract. You can only default on a binding contract.
Both the TPC and the Texas 1 to 4 Family Residential Resale Contract support the concept that delivery of the earnest money is a performance issue.
Additionally, Texas has no “right to rescind” the contract within a certain number of days. Once signed, executed, and notice is delivered to all parties, it is binding.
Source: http://www.thebranchteam.com/wordpress/2011/06/18/when-does-a-texas-contract-become-binding/
Tom Branch and Gina Branch, The Branch Team with RE/MAX Dallas Suburbs, service the greater North Dallas suburbs including Dallas, Plano, Allen, McKinney, Frisco, Lewisville, and Carrollton. While Gina concentrates on traditional listings and buyer/tenant representation, Tom specializes in assisting distressed homeowners to avoid foreclosure. Tom and Gina have published two books (Achieving Rock Star Status and The Field Guide to Short Sales) and are available for speaking engagements in the greater Dallas - Fort Worth Metroplex. Subscribe to The Branch Team Blog.
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