Can You Terminate a Contingent Real Estate Contract?

Can You Terminate a Contingent Real Estate Contract?
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A well-drafted real estate contract spells out the steps that each party must take to achieve close of escrow, when the buyer pays the purchase price and the seller transfers title. Many of these steps are contingencies, or conditions, that one party is obligated to satisfy. Depending on how the contingency is drafted, if that party is unable to satisfy the contingency, either party may walk away from the deal.


  • If a real estate contract is pending contingencies, and the contingencies are not met within a specified time frame, typically one or both parties may terminate the contract.

Contract Contingencies for Buyer

The buyer will have the majority of the contingencies under a home purchase agreement. Common contingencies give the buyer time to secure finance, carry out a home inspection and have the property appraised to a satisfactory value. Other provisions might make the deal contingent upon Housing Association or Co-op board approval, if needed, or the buyer arranging insurance, especially in states where a history of adverse weather conditions have made insurance difficult to procure. According to NOLO, these are standard contingencies and it would be unusual for a seller to reject them.

Contract Contingencies for Seller

A seller's main aim is to transfer title to the property and receive the sale proceeds as quickly as possible. As such, he typically has less need for contract contingencies. One exception is the seller who will only sell his home if he can successfully close on a replacement property. This effectively makes the entire deal contingent on the seller buying another home. The reverse scenario can also apply, whereby the buyer can terminate the contract if he is unable to sell his existing home.

Termination of the Contract

If a contingency goes unsatisfied, one or both of the parties can typically terminate the contract without penalty. Because the buyer has more contingencies, he can more easily walk away. However, the buyer can only terminate the contract if he is not himself in breach. For example, if the contract states that the buyer must conclude his home inspection within seven days, and he waits fourteen, it will be the seller, and not the buyer, who acquires the termination right.

Renegotiating the Contract

If both parties are committed to the deal, a contingency "failure" offers the chance to renegotiate sale terms. For example, if the property appraises below the sale price, the parties may decide to negotiate a price reduction, rather than walk away from the deal. The change is documented as an amendment to the original purchase contract.

Meeting All Contingencies

Once all contingencies are met, both parties must move towards closing. Legal remedies are available if a party fails or refuses to close. One such remedy is "specific performance." This forces the defaulting party to specifically perform the contract, and transfer, or accept the transfer, of title in accordance with the contract terms.

Before a court rules in favor of specific performance, there must be a valid and binding contract, monetary damages would be insufficient compensation and both parties in the contract must have mutuality of obligation by undertaking duties toward each other.