TODAY'S EXPLAINER: Termination Option

The Termination Option is a clause in a TREC (Texas Real Estate Commission) form that allows a buyer to terminate a contract within a specific period, typically within a few days after the contract has been executed. This option is typically included in the contract to give the buyer an opportunity to review the property, obtain financing, and perform other due diligence before committing to the purchase.

If the buyer chooses to exercise the Termination Option, they must provide written notice to the seller within the specified period, along with the reason for terminating the contract. The notice should be sent by certified mail, return receipt requested, or another method that provides proof of delivery.
Upon receiving the notice, the seller must release the earnest money deposit to the buyer within a specified period, typically within ten days. The seller may also request a copy of any inspection reports or other information obtained by the buyer during the due diligence period.

It's important to note that the Termination Option is not automatic and must be explicitly included in the contract. The terms and conditions of the Termination Option can vary depending on the specific TREC form used and the negotiations between the buyer and seller.

Overall, the Termination Option provides an important protection for the buyer in the real estate transaction, allowing them to walk away from the deal if they uncover any issues or are unable to obtain financing, without forfeiting their earnest money deposit.


Cliff Williams, Attorney at Law
Joe Angle, Attorney at Law

(not retired)
Just call 903-339-1374 to consult regarding Real Estate, Trusts, Probates, Wills, Evictions, Foreclosure, 1031 Exchanges.
Located at The Norman Law Firm

Joe Angle has been a trusted attorney in Jacksonville, Texas for decades and continues to serve his clients with thorough attention to detail and an immense knowledge of the practice of law. He remains at his same office in the Norman Law Firm building but has joined the practice of Cliff Williams Law Office.  This is the official law office for Attorney's Title of Cherokee County. 


What Is Section 1031?
Broadly stated, a 1031 exchange (also called a like-kind exchange or a Starker exchange) is a swap of one investment property for another. Most swaps are taxable as sales, although if yours meets the requirements of 1031, you’ll either have no tax or limited tax due at the time of the exchange.2
In effect, you can change the form of your investment without (as the IRS sees it) cashing out or recognizing a capital gain. That allows your investment to continue to grow tax-deferred. There’s no limit on how frequently you can do a 1031 exchange. You can roll over the gain from one piece of investment real estate to another and another and another. Although you may have a profit on each swap, you avoid paying tax until you sell for cash many years later. If it works out as planned, you’ll pay only one tax at a long-term capital gains rate (currently 15% or 20%, depending on income—and 0% for some lower-income taxpayers, as of 2022).3

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