Terminating A Real Estate Contract

Terminating a real estate contract—especially after an inspection—can be a strategic and legally sensitive move. Here’s how it works, what your rights are, and how to do it properly.

🧾 Common Grounds for Termination

1. Inspection Contingency

   • Most contracts allow the buyer to cancel if the home inspection reveals significant issues.

   • You usually have a set timeframe (e.g., 7–10 days) to terminate without penalty.

2. Financing Contingency

   • If you’re unable to secure financing or your loan falls through, you may cancel within the allowed contingency period.

3. Appraisal Contingency

   • If the home appraises for less than the offer price and the seller won’t lower the price, you can walk away (if your contract has this clause).

4. Title or Legal Issues

   • You may terminate if the seller can’t provide clear title or resolve title issues before closing.

5. Contract Violations

   • If the seller fails to meet agreed-upon obligations (e.g., repairs, disclosures), that can be grounds for termination.

✍️ How to Terminate the Contract

1. Review the Contract & Deadlines

   • Identify the relevant contingency clauses and check your timeline.

   • Note the final day of the inspection period or any other relevant deadline.

2. Submit a Written Notice

   • Terminate in writing, usually via a standardized form (e.g., “Buyer’s Notice of Termination”).

   • Your agent or real estate attorney can help you complete and deliver this.

3. Request Earnest Money Refund

   • If termination is valid under a contingency, you’re entitled to your earnest money back.

   • Your agent or title company will facilitate this.

4. Document Everything

   • Keep written records of your reason for termination, inspection reports, and communication in case of dispute.

⚠️ Risks of Improper Termination

• If you miss the contingency deadline, you may lose your earnest money deposit.

• If you terminate for a reason not covered by the contract, the seller could claim breach.

• Some sellers may push back or demand mediation/arbitration (depending on local laws and contract terms).

🔐 Pro Tip

Always consult your real estate agent and/or attorney before terminating. They’ll make sure it’s done properly and help you avoid losing money or getting into legal trouble.

To figure out if you’re still within your inspection contingency period, you’ll need to check a few specific items in your purchase contract:

✅ 1. Find the Contract Start Date

• Look for the “Effective Date” or “Date of Acceptance”—this is usually when both parties signed the agreement.

• This is Day 0.

✅ 2. Locate the Inspection Contingency Clause

• The clause will specify how many days you have for the inspection and to decide whether to proceed, negotiate, or cancel.

• Common timelines: 7 to 10 calendar days, though this varies by contract and state.

✅ 3. Count Calendar Days (Unless Stated Otherwise)

• If your contract says “10 days,” and the effective date was May 1, your last day to cancel under the inspection contingency would be May 11.

• Check whether the contract uses calendar days or business days (some states or brokerages specify this).

• Watch for wording like “by 5:00 PM local time on the last day.”

✅ 4. Double-Check for Extensions

• Some contracts allow extensions to the inspection period with mutual agreement in writing.

• See if you or your agent filed any formal extension requests.

📞 5. Ask Your Agent or Title Company

• They can quickly confirm key dates based on the signed contract and guide you if time is tight.

⏳ If You’re Close to the Deadline:

• You may still be able to terminate, but act fast—a few hours late can mean forfeiting your earnest money.

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