What the contract lets you do

Overview

Seven instruments, one clock each

Set out plainly, with the deadline attached to each, because the deadline is the instrument:

• The inspection contingency is the contract term that makes a post-inspection negotiation possible at all. It expires, or in some states survives until it is affirmatively removed.
• The option period is a Texas term of art: a fee buys an unrestricted right to walk away for a stated number of days.
• Earnest money is the deposit, and it is the thing actually at risk when a buyer decides how hard to push.
• The repair amendment is the instrument that turns a negotiation into a contract term. Everything agreed before it is signed is unenforceable.
• Contract termination is the exercise of a right the contract gave you, with the deposit consequences the contract specifies.
• Backing out is leaving without such a right, which is a different event with a different price.
• After closing is the position once the deed records, where the clocks that matter are statutory rather than contractual.

The form, not the custom

The single most useful thing to understand about this category is that your rights were mostly written by somebody who has never heard of your transaction. In Texas the purchase contract is promulgated by a state agency: the Texas Real Estate Commission's One to Four Family Residential Contract, form 20-19, dated May 4, 2026, which replaced form 20-18, with changes made to it by the Commission's one-page Amendment to Contract, form 39-11, which replaced 39-10. In California the standard residential purchase agreement is published by a trade association and is restricted to its members, which is a materially different arrangement. In North Carolina the standard offer is jointly approved by the state bar association and the realtor association, and was revised effective May 27, 2026.

Three publishers, three structures, and a reader who assumes their state works like the one they read about online will make an expensive mistake. The three models are worth knowing because they are genuinely different in kind, not just in wording.

Texas: a paid option, not a contingency

Texas has no inspection contingency. It has a purchased right to leave. Under Paragraph 5B of form 20-19, the seller grants the buyer "the unrestricted right to terminate this contract by giving notice of termination to Seller" within an agreed number of days after the Effective Date. Three details in that paragraph are where buyers come unstuck. The clock runs from the Effective Date of the contract, not from the inspection. Notice must be given by 5:00 p.m. local time where the property is located, not where the buyer happens to be. And the right is unrestricted, which means it does not depend on the report finding anything, which in turn is why the option fee is not refunded when it is used.

The form is also strict about the mechanics in a way that catches people. If no dollar amount is stated as the option fee, or the buyer fails to deliver it within the time required, the buyer "shall not have the unrestricted right to terminate this contract," and the form adds that "time is of the essence" for that paragraph. The option fee and the earnest money are separate payments, and where a single payment arrives the escrow agent applies it first to the option fee and then to the earnest money. That ordering creates a precise asymmetry: missing the option fee removes the buyer's exit, while missing the earnest money gives the seller one, although the seller's right to act on it evaporates once the buyer cures.

California: a contingency that survives until it is removed

California inverts the Texas model. The standard purchase agreement gives the buyer a period in which to conduct inspections, investigations, tests, surveys and other studies, defaulting to 17 days after acceptance. The contingency does not lapse when that period ends. It stays alive until the buyer delivers a removal or a cancellation, and a seller who wants it gone must first deliver a Notice to Buyer to Perform, which gives the buyer at least two further days. Where either party cancels under a right duly exercised, the parties sign mutual instructions releasing the deposit to the party entitled to it, less fees and costs the escrow holder has already paid on that party's behalf. So the honest answer to whether you get all of the deposit back in California is usually yes, minus escrow charges.

North Carolina: a fee that goes to the seller

North Carolina sells the same economic bargain as Texas through different plumbing. A negotiated due diligence fee, paid by the buyer to the seller rather than to an escrow agent, buys a period in which terminating is, in the state real estate commission's own words, "the buyer's sole decision to make." The earnest money typically comes back and the fee typically does not. The 2026 revision softened the deadline: failure to pay the fee on the effective date no longer puts the buyer immediately in breach, the buyer has until the end of the next banking day, and a seller cannot terminate for non-payment without first serving a written demand that gives one further banking day to cure.

The exits people forget

Readers assume that once the inspection window lapses they are committed, and on the forms that can be read that is not quite right. Two further exits sit later in the Texas contract and neither depends on the inspection report.

Paragraph 7E provides that neither party is obligated to pay for lender-required repairs, including treatment for wood-destroying insects; that if the parties do not agree to pay for them "this contract will terminate and the earnest money will be refunded to Buyer"; and that if the cost of those repairs exceeds 5% of the sales price, the buyer may terminate with the earnest money refunded. That is an automatic exit, operating after the option period has normally expired, driven by the underwriter rather than by the buyer.

The second is the disclosure notice. Under Paragraph 7B(2), a buyer who did not receive the Seller's Disclosure Notice may terminate at any time before closing with the earnest money refunded, and a buyer who receives it late may terminate for any reason within seven days of receipt. The same structure applies to the Seller's Water Disclosure. There is a statutory counterpart: Texas Property Code section 5.008 provides that where a contract is entered into without the required notice, "the purchaser may terminate the contract for any reason within seven days after receiving the notice." California Civil Code section 1102.3 runs the same idea on a shorter clock, three days after personal delivery of the transfer disclosure statement or five days after delivery by mail or electronic transmission.

What it costs to leave without a right

Terminating and backing out are different events, and the gap between them is the most expensive thing in this category. The Texas contract's default paragraph is an election of remedies, not a cap: a seller facing a buyer's default may "enforce specific performance, seek such other relief as may be provided by law, or both," or terminate and receive the earnest money as liquidated damages. Specific performance is listed first, for both parties. The widely held belief that the most a buyer can lose is the deposit is not what the form says. California's standard form does cap it: where the property is a dwelling of no more than four units and the buyer intended to occupy one, the amount the seller may retain as liquidated damages is no more than 3% of the purchase price.

Nothing counts until it is on the amendment

Everything agreed with a seller after an inspection is unenforceable until it reaches a form, and in Texas that form is a single page with ten numbered boxes. A price reduction is box 1. Seller-completed repairs are box 2. A seller credit or seller-paid closing costs are box 4, changing the dollar figure in Paragraph 12A(1)(b). A split of lender-required repairs is box 6. An extension of the option period, with an additional fee that is not automatically credited to the sales price, is box 7. And box 8 is the one to read twice: it records that the buyer "waives the unrestricted right to terminate the contract for which the option fee was paid." That checkbox ends the buyer's exit in exchange for nothing stated on the form, and it is routinely the seller's price for agreeing to repairs. Box 2 also carries a printed notice that Paragraph 7 of the contract, not the amendment, governs completion, documentation and warranty transfer, which answers the common question of who says the repairs have to be done properly.

The numbers, with their dates attached

In the National Association of REALTORS August 2026 REALTORS Confidence Index Survey, 7% of contracts were terminated in the previous three months, essentially flat against 6% a month earlier and 6% a year earlier; 14% of contracts had delayed settlements; 20% of buyers waived the inspection contingency, a noisy series that read 16% the month before; and contracts typically closed in 30 days. Walking away is not rare and it is not normal either.

On why contracts fail, the only sourced breakdown is old and there is no replacement: in NAR's February 2015 Confidence Index survey, 29% of reported contract terminations were attributed to home inspection issues and 25% to financing problems. NAR's current survey reports the termination rate but no longer publishes a breakdown by reason, so that figure is eleven years old and should be read as an order of magnitude rather than as a current share. Note also that no published series separates a buyer exercising a bought right from a buyer walking away and forfeiting, and for a reader those are completely different events.

The last clock is the one that cannot be negotiated. Every instrument above operates while the contract is still executory. Once the deed records, the contractual rights are spent and what remains runs on statutory periods instead. That is the whole reason the position after closing is treated separately on this site, and the reason the instruments on this page are worth using while they still exist.