Can You Terminate a Contingent Real Estate Contract?

by Jayne Thompson
Your house isn't sold until close of escrow.

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.

Buyer Contingencies

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.

Seller Contingencies

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.


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.


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.

Unconditional Contract

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. According to the "New York Times," the courts are reluctant to hold a buyer to specific performance, but typically grant it against a seller.

About the Author

Jayne Thompson qualified as a solicitor in 1996. She holds a first degree in law and business from the University of Birmingham and a Master of laws from the University of East London.Thompson shamefully admits to using her family as fodder for the lifestyle and parenting articles she also writes, which have appeared most recently in "The Green Parent" magazine.

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