What happens if a buyer terminates a contract due to unsatisfactory title?

When a buyer terminates a contract due to unsatisfactory title, no penalty applies if the buyer is exercising their right to cancel based on conditions typically outlined in the contract or purchase agreement, such as a title contingency. This provision is designed to protect the buyer, allowing them to withdraw from the transaction without incurring financial repercussions if the title search reveals issues that cannot be resolved satisfactorily.

This approach ensures that buyers can make informed decisions about purchasing real property. If problems exist, such as liens or other claims against the property that affect ownership, the buyer is not at fault for wanting to terminate the agreement to safeguard their interests. In such cases, the earnest money deposit is usually refundable to the buyer, reinforcing the idea that they should not face penalties for ensuring clear title before proceeding with the purchase.