7 Ways to Terminate a Real Estate Contract

Nyalls Carlton
Dec 22, 2017 · 3 min read

A real estate transaction can have many ups and downs. One moment, you are ready to start your new life and your beautiful home, and the next you are wanting to leave the house where it stands. Everything doesn’t always go as planned, and in the case of something going wrong in any situation, you need to have a way out. I’ve decided to go into detail on the seven ways that you can legally terminate an executed real estate contract.

Title and Survey

Usually 5–6 business days after executed contract, your title commitment should be issued. This document will outline any current liens or encumbrances to the property. You are normally given a 5–7 day title review period. You may object to these defects in writing during this period, and if they are not cured, you have the right to terminate.

Also, if the survey on this property clearly shows any encroachments by neighbors, construction, etc., you may object within the same time title review period.

Sellers Disclosure

A sellers disclosure must be filled by the seller and signed by both parties. This document outlines the general condition of the house (to the best of the seller’s knowledge). Because this is not always provided before the initial execution of the contract, if there are items on the Seller’s Disclosure that you may be concerned about, you have the right to turn away.


A homeowner’s association is an organization in a community that creates and enforces rules for the properties within. Yearly dues are often paid by homeowners in the community and any home purchases within the jurisdiction automatically qualify the new homeowner as a member of the HOA.

Similar to the seller’s disclosure, if there are any rules, regulations, or HOA dues that you were unaware of at contract execution, you have the option to terminate the contract.

Sale of Other Property

If you are under contract on the sale of your home, you have the opportunity to go and write an offer on another home to move into. Just make sure the contract is contingent upon the sale of your primary residence. When a contract is a contingent upon the sale of another property, you are not obligated to move forward with the purchase if something prevents your primary residence from closing in a timely manner.

Lead-Based Paint

In 1978, the federal government banned the use of lead-based paint. This paint was banned because it was determined to be one of the main causes of lead poisoning. If lead-based paint is discovered in a house and not mediated, you are no longer legally bound by the contract.

Loan Approval

In most contracts, you have a certain amount of days to get a final approval for a loan. Although you may have been pre-approved for a loan at the beginning of the home search, your lender will still require need additional verification closer to the close date. If for some reason you are not able to get final approval for your home loan by the specified financing period, you may terminate the contract and be reimbursed for your earnest money. This is known as a financing contingency.

Some of the most common catalysts for a loan denial is a sudden change in credit score, debt-to-income ratio, and employment verification.

Option Period

This period is mostly used to hire a professional inspector to have a look at all components of a property. During your option period (or inspection period) you are entitled to an unrestricted right to terminate your contract. Although you are allotting this time for a property inspection, you are not required to state a reason for terminating.

I hope this helps you with your next home purchase. For a quick explanation of every aspect of the home buying process, download my free buyers’ guide.

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