Definition
The act of ending a purchase contract before closing, which typically releases both parties from obligations. Termination can occur during the option period without penalty under proper conditions.
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Contract termination can be initiated by either the buyer or seller depending on the circumstances. During the option period, the buyer can terminate for any reason. After the option period, termination typically requires that a contingency has failed (such as financing or appraisal). Mutual termination can occur at any time if both parties agree. Termination should be documented in writing to avoid disputes.
Pro Tip
Understand the difference between your option period (when you can terminate for any reason) and afterward (limited to contingency failures).
Example
A buyer discovers structural damage during home inspection; before the inspection deadline, they submit a Termination of Contract notice, and earnest money is returned without further obligation.