If a U.S. home sale appears to be falling apart before closing, start with the signed purchase agreement—not an assumption that either party can walk away or claim the earnest money. Check the relevant contingency, notice deadlines, closing date, and any written amendments. The buyer’s and seller’s rights depend on the contract, what each party did and when, and the law where the property is located.
First, establish whether the sale is delayed, terminated, or in dispute
“The sale fell through” can describe different events with different consequences: a buyer may have sent a formal termination notice, invoked a contingency, asked to extend the closing date, said informally that they will not proceed, or simply missed a deadline. A lender’s denial or an inspection problem does not, by itself, establish that the contract ended. The agreement may require a particular notice, delivered by a particular deadline, before a party can use a contingency to terminate.
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Read the signed agreement and all addenda and amendments. Find the provision tied to the problem, the required notice method and deadline, the closing date, and any extension or termination already agreed in writing. The National Association of REALTORS® (NAR) explains that contingencies—including financing, inspection, appraisal, home-sale, and home-close provisions—make a party’s obligation depend on stated conditions; the effect of one turns on the contract’s actual terms. See NAR’s guide to real estate sales contract contingencies.
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Gather the paperwork and build a timeline
Collect the signed purchase agreement, addenda, amendments, notices, escrow receipt, and relevant lender, inspection, appraisal, title, or insurance communications. Make a dated timeline of the contract deadlines, notices sent and received, and any promised or completed actions. This helps the parties and their professionals distinguish a missed deadline from an agreed extension or a valid termination.
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- Keep copies of messages and notices, including how and when they were delivered.
- Ask the broker or closing professional to explain the process and identify the documents the escrow holder needs.
- Do not sign a termination, release, or other document you do not understand, particularly if the other party contests the contract’s status.
If you are the buyer
Check whether a home-sale or home-close contingency applies
A home-sale contingency generally gives the buyer time to sell an existing home; a home-close contingency generally gives time to close a sale that is already under contract. If your purchase depends on either, check its deadline and follow the agreement’s notice procedure. If the condition is not met, ask your agent or closing professional—and, where needed, a local real-estate attorney—what steps are required to terminate and request the earnest money. NAR describes the distinction between these contingencies in its contingencies guide.
Review other possible contract rights before withdrawing
If you want to back out for another reason, check 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 is still available or that changing your mind alone makes the deposit refundable. The contract and state law govern.
If you are the seller
Ask for the contractual basis and keep the record
If the buyer says they will not close, preserve the message and ask, through the appropriate professionals, for the written notice or contract provision they are relying on. An informal statement is not necessarily the same as a completed contractual termination. Do not promise to keep the earnest money until the agreement and applicable law have been reviewed.
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If the parties disagree about whether the first contract ended or who receives the deposit, seek advice from a real-estate attorney licensed where the property is located before signing a release or committing the home to another buyer. Texas REALTORS® specifically cautions Texas sellers in a termination and earnest-money dispute to prioritize formal termination; that is Texas professional guidance, not a rule for every state. See its Texas earnest-money FAQ.
If you accepted an offer with a home-sale or home-close contingency, NAR says you may continue showing the property to other prospective buyers. Showing the home is not the same as having the right to convey it under a second contract: any further-offer, notice, or kick-out process depends on the first agreement. Consult NAR’s contingencies guide and the contract before acting.
What happens to earnest money?
Earnest money is not automatically awarded to either side when a sale fails. The escrow holder generally holds it pending closing or resolution of the issue. If a qualifying contingency was not met and the buyer followed the contract’s requirements, the buyer may be entitled to a return. If the buyer failed to perform without a valid contractual right to terminate, the seller may claim a remedy. The result depends on the agreement, the notice and timing, escrow instructions, and state law. NAR’s escrow and earnest money guide explains the general role of contingencies and escrow.
Ask the escrow holder what signed instructions or other documents it requires, but do not assume the holder can decide which party is legally entitled to the funds. Texas-specific guidance describes formal termination as requiring a written agreement—often including an earnest-money release—or a court order. See the Texas REALTORS® FAQs on earnest money and contracts and forms. The procedure elsewhere may differ.
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Get prompt advice from an attorney licensed in the property’s state if the other party contests termination, the deposit is significant, a deadline is imminent or has been missed, you are considering a second sale, or someone has threatened legal action. A broker or closing professional can help explain transaction steps, but a disagreement about legal rights calls for legal advice. NAR’s consumer guides direct readers to consider state-specific advice, and Texas REALTORS® likewise recommends attorney involvement in earnest-money disputes.
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Protect your move plans while the status is unclear
A delay or failed sale can affect a buyer’s next purchase or a seller’s move. Avoid making irreversible moving, housing, or possession plans until you know whether the transaction is extended, still pending, or terminated in accordance with the contract. NAR’s guides to overcoming roadblocks to a sale or purchase and steps between signing and closing address timing and coordination during the pre-closing period.
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