Final Walkthrough to Closing: Can a Buyer Still Back Out?

Signing papers and officially committing to a purchase with a huge price tag can be a stressful moment in the homebuying process. Add any indecision or last-minute issues found with the property, and that stress can escalate to panic. Maybe you’ve just uncovered new flooring damage during your final walkthrough. Or maybe you’re getting cold feet hours before gathering at the closing table. Either way, you don’t know what to do.

If you’re wondering whether a buyer can back out after closing or after the final walkthrough, you’re not alone. About 16% of homes under contract in December 2025 were cancelled, which is the highest December percentage since 2017, according to Redfin data.[1]

While you might be able to walk away from a home sale, it doesn’t always come without penalty. In reality, it all depends on where you are in the closing process and the details laid out in your contract.

Whether you’ve uncovered damage during your final walkthrough or feel immediate buyer’s remorse after putting pen to paper at closing, we’ll go over what your options are at different stages of the process and how much it could cost you to back out of a home sale.

The timeline of no return: Where you are in the process

Your options for backing out of a home sale — and any penalties you might incur — depend on where you are in the closing process and what’s included in your contract. There are four key stages in a home sale process where your options change the further along you get:

Stage 1: You’re under contract and contingencies are active

This is an early stage where you have the most protection through active contingencies.

For example, if you have a home inspection contingency and the inspection uncovers a mold problem, you can back out of the sale and get your earnest money back as long as you do so within the contingency window and give the seller proper written notice.

Stage 2: Contingencies have been removed or waived

If you’re at this stage, it gets harder to back out of a sale.

Contingencies come with deadlines by which you must either remove them (because conditions have been met and you are proceeding with the sale) or cancel the contract (for a reason protected by the contingency).[2]

For example, if you removed a home inspection contingency after its 10-day deadline, you can no longer cancel the sale because of an issue discovered during the inspection. If you don’t have good cause for cancelling the sale, walking away now means losing your earnest money deposit. The seller could even decide to take legal action against you.

Stage 3: You’ve signed closing documents, but the deed has not been recorded yet

While this varies by state laws, in many states, the sale isn’t legally finalized until the deed is recorded with the county.[3][4] But backing out at this point puts you in breach of contract.

That means not only will you need to forfeit your earnest money deposit, but the seller also has more legal grounds to sue for the contract breach.

Stage 4: The deed has been recorded with the county

At this point, the deal is legally complete, and as the home’s new owner, it’s too late to back out. If you’re in this stage, it’s time to get a real estate attorney to pursue next steps.

“A buyer will usually have a chance to back out before the time of signing closing documents in case of contingencies (such as financing),” says Nick Heimlich, attorney and owner of Nick Heimlich Law. “After signing, it will be in breach of contract to back out. Once the deed is registered, then the sale is complete and the buyer cannot cancel.”

» LEARN: What Are Contingencies in Real Estate?

What happens to your earnest money if you back out

The fate of your earnest money depends on whether you back out with a valid and active contingency. If you have one, you can cancel the sale with proper written notice and recoup your earnest money deposit from the seller. Once a contingency expires, however, you’ll lose your protection to back out of the sale without financial or legal consequences.

If you don’t have contingencies in your contract or if they’ve been removed, backing out likely means giving up your earnest money. Because these deposits can cost 1-3% of the purchase price, it’s not a small chunk of change to lose.[5]

For a home that costs $500,000, that equals $5,000-15,000. And in competitive markets, earnest money can go as high as 10% of the purchase price.[6]

What about the seller? What else can they do beyond keeping your earnest money?

The fastest path forward for sellers is often relisting the house and hoping another buyer comes along quickly. But sometimes, the seller can also take legal action against you if they incurred financial damages, such as relisting at a lower price or covering carrying costs.

The seller can even go as far as to seek a court order forcing the buyer to complete the home sale — a process called specific performance. But this isn’t a very common action for sellers to take against buyers. It’s more common for buyers to seek specific performance against sellers refusing to follow through on the sale.[7]

“Sellers tend not to seek specific performance but can also threaten it to coerce the buyer,” says Heimlich. “It is normally applied when the seller is incapable of replacing a buyer easily and when a huge loss is incurred by the seller.”

When it comes to the earnest money, conflicts typically get resolved between the parties without taking the matter to court.

Anne Peshka, sales associate and Realtor at Exit King Realty, was the listing agent on a sale where the buyer — who had $10,000 held in escrow — cancelled the day before closing. While the seller was “upset” and “confused,” Peshka explains that the seller was reasonable, and that “the escrow was split between the two to avoid a legal situation.”

What you can actually do at the final walkthrough

“The final walkthrough is a condition check, which is different from a new inspection,” says Daniel Cabrera, owner of Sell My House Fast SA TX in San Antonio, Texas. “The action step is to ensure that repairs are complete, that the house is substantially in the same condition as at contract time, and that everything agreed upon is still there.”

If an issue was present at the inspection and you waited until the final walkthrough to raise it, you generally can’t use it as grounds to cancel the sale without penalty.

“The final walkthrough is your last chance to confirm that the home is in the condition that you agreed to buy, not a redo of the inspection,” says Cabrera.

However, as a buyer, there are a few scenarios where you have legitimate grounds to pause or renegotiate at the walkthrough:

• There’s new damage: Discovering new damage after the inspection, such as wall damage behind removed wall decor, a broken appliance, or damaged floors gives you grounds to negotiate repairs. 
• Agreed-upon repairs were not completed: Did the seller agree to repair the roof and didn’t follow through? Did they agree to fix a broken toilet but the job was done poorly? These are problems to address immediately.
• Items are missing: If items such as light fixtures, window treatments, or appliances are missing at the walkthrough that were supposed to convey with the property, you can raise that issue. 
• New water intrusion or structural change: Any new water damage or foundation or other structural change that wasn’t present at the inspection should be noted.

Cabrera shares a real-life example where a buyer found new issues at the final walkthrough that had to be addressed before finalizing the sale.

“The seller had removed a mounted TV from the wall, damaged drywall, and had an HVAC system that was not cooling,” says Cabrera. “The buyer refused to close that day.

“We photographed the damages, and had a brief estimate from a contractor. We negotiated a credit for repairs and a written agreement to fix the HVAC system within seven days.”

Sometimes, the final walkthrough doesn’t go as smoothly as anticipated. If that happens and you find a real problem that needs to be fixed, here are some options you have:

• Ask the seller to fix it before closing, especially if it’s a minor issue.
• Ask the seller for a closing credit to cover the repair cost, or if they will lower the price. This option worked well in Cabrera’s case.
• If you need time to document the issue and negotiate with the seller, ask if the seller will agree to delay the closing. 
• If permitted by lenders, some of the seller’s proceeds can be held in escrow after closing until the necessary repairs are done. 
• You can back out of the sale, but note that you stand to lose your earnest money if no active contingencies remain.

When backing out might still be an option (even late)

There are some situations when you might still be able to cancel a real estate contract — but be warned, the criteria to do so are narrow.

One situation is if you still have an active financing contingency in your purchase contract. Also called a mortgage contingency, this clause allows you to back out and keep your earnest money if your lender rejects your loan application. Changes to your credit score or job loss can trigger a loan rejection, even if you received a mortgage preapproval. 

Also, if you have a valid appraisal contingency and the home appraisal comes back lower than the purchase price, you can leverage that clause to walk away with your earnest money. Without an active contingency, you’ll be expected to make up the difference in the appraised value and the purchase price. 

Contingencies must be included in your contract, and you must be within the deadline window for you to use them to back out. While the timing varies by contract, financing contingencies are typically in place for 30-60 days.[8] Appraisal contingencies might last for 10-21 days.[9] 

Along with leveraging active contingencies to back out of a home sale, some state-specific protections exist as well:

• Attorney review period: This option, available in some states like New York and New Jersey, is typically a 3-5 business day window during which a real estate attorney reviews the signed contract on the buyer’s behalf. During this review window, the buyer can back out without penalty.[10]
• Option period: A common option in Texas, an option period consists of a negotiated amount of days during which the buyer can back out of the sale for any reason and reclaim their earnest money. The buyer must pay a fee to have an option period.[11]

Finally, if you and the seller come to a mutual agreement to cancel the sale, you can walk away from the home. Both parties must agree in writing to terminate the contract and negotiate the handling of earnest money.  

If you're the seller: What to do when a buyer backs out

When the buyer backs out of the purchase, the first thing you should do as a seller is review the contract. Check whether the buyer had a contractual reason, such as active contingencies, to cancel the deal.

The next step is to discuss the situation with your agent and a real estate attorney. They’ll advise you on your options, whether that’s retaining the earnest money deposit or suing the buyer. You’ll need to supply the buyer and the buyer’s agent with formal written notice if you consider them in breach of contract.

Overall, you can pursue a few different paths:

• Keep the earnest money: Contractually referred to as “liquidated damages,” keeping the earnest money is a common result for sellers as long as any buyer contingencies were removed from the contract.
• Sue for actual damages: If you have to relist and then sell the house at a lower price, you can potentially sue the buyer who bowed out for the lost proceeds and any extra incurred costs associated with the broken contract.
• Seek specific performance: While technically an option, forcing the buyer to follow through on the deal and take ownership of the house isn’t very common.
• Relist the house: As long as the local housing market hasn’t cooled, this is often the quickest way for sellers to recover from a failed transaction.

To avoid legal fees and spending extra time on a lawsuit, most earnest money deposits are settled privately through escrow rather than in court. Both parties must sign off on the agreement, whether that’s a negotiated split of the deposit or total forfeit of the funds by the buyer.[6]

» READ MORE: Can a Seller Back Out of an Accepted Offer on a House?

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