I don’t think people fully grasp just how many
land deals fall apart during the contract phase.
The numbers are staggering:
In Texas, 43% of land contracts never close.
I’ve reviewed over 200 land transactions across Texas markets—both successful and failed—and identified 10 critical contract terms that can make or break your deal:
1️⃣ Due Diligence Period Length.
In Houston, contracts with less than 60 days for due diligence are 3.2x more likely to terminate.
Yet 67% of sellers push for 30-45 days.
For parcels over 2 acres, you need a minimum of 75-90 days to properly vet the land.
2️⃣ Earnest Money Release Provisions.
This is where inexperience costs you.
58% of failed land deals resulted in earnest money disputes.
Smart buyers structure earnest money to release in stages:
• 25% after feasibility period
• 25% after entitlement milestones
• 50% after final approvals
3️⃣ Entitlement Contingencies.
Without specific entitlement contingencies, contracts fail 74% of the time.
In Texas, rezoning can take 12-18 months.
Successful contracts have clear zoning requirements, density thresholds, and timelines for approvals.
4️⃣ Survey Review Period.
This seemingly minor term has major implications. Contracts allowing just 10 days for survey review had a 31% higher termination rate than those allowing 30 days.
Why? Because encroachments, easements, and boundary issues take time to resolve.
5️⃣ Environmental Contingencies.
27% of contracts terminate due to environmental issues found during Phase 1 assessments.
Be specific in your contingencies:
• Who pays for Phase 1/Phase 2 studies.
• Remediation responsibility thresholds.
• Clear termination rights.
6️⃣ Utility Capacity Verification.
This is the silent deal-killer. 38% of terminated contracts cited insufficient utility capacity as the reason.
Your contract should include:
• Verification of water/sewer capacity.
• Confirmation of connection points.
• Cost allocation for any necessary upgrades.
7️⃣ Extension Rights.
In today’s market, flexibility is a must. Contracts with built-in extension options (for a fee) close 47% more often than those without.
8️⃣ Seller Disclosure Requirements.
The more detailed the seller disclosures, the lower the termination rate. Make sure these are clearly outlined.
9️⃣ Assignment Rights.
31% of contracts involve assignment before closing. Restrictive clauses that limit assignments kill deals. Negotiate flexibility here.
🔟 Closing Cost Allocation.
This seems minor but adds up. In transactions over $1M, closing costs typically range from $15K-$30K. Clear allocation prevents last-minute disputes.
If you want to protect your interests in land acquisition, don’t just focus on the purchase price. Pay attention to these contract terms.
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Tu Amigo,
David Cabrera
P.S. What contract term have you seen cause a deal to fall apart? Drop a comment with your experience!
