In a perfect world, every accepted offer glides smoothly from contract to closing. But unfortunately, real estate isn’t always that tidy. Sometimes circumstances change, inspections reveal surprises, financing falls apart, or one party simply can’t move forward.

If you’re navigating a transaction in Maine, here’s what you need to know about terminating a Purchase and Sale Agreement (often called a P&S), and when earnest money is returned — or forfeited.

First Thing's First: What Is a Purchase and Sale Agreement in Maine?

In Maine, most residential transactions use standardized forms created by the Maine Association of REALTORS®. Once both parties sign the P&S, it becomes a legally binding contract.

That contract outlines:

  • Purchase price

  • Deposit (earnest money) amount

  • Contingencies

  • Deadlines

  • Closing date

  • Default terms

Once signed, you can’t simply “change your mind” without consequences. Termination depends on whether you’re acting within the terms of the agreement.

Can You Terminate a Purchase and Sale Agreement in Maine?

Yes — a buyer can terminate a Purchase and Sale Agreement (P&S) in Maine if they are acting within a contractual contingency or if the seller breaches the contract.

If termination occurs properly under the terms of the agreement, the buyer’s earnest money is typically returned.

If a buyer defaults outside of those protections (i.e. they just changed their mind), the earnest money may be forfeited.

What Are the Legal Reasons to Terminate a Real Estate Contract in Maine?

Here are the most common valid reasons a buyer may terminate a home purchase contract in Maine:

1. Can a Buyer Terminate After a Home Inspection in Maine?

Yes — if the contract includes an inspection contingency.

During the inspection period, the buyer may:

  • Conduct inspections

  • Request repairs or credits

  • Renegotiate

  • Or terminate the contract

If the buyer terminates in writing within the inspection deadline, the earnest money is typically returned.

If the deadline passes without written termination, the buyer may lose this protection.

2. Can a Buyer Back Out if Financing Falls Through?

Yes — if there is a financing contingency in the P&S and the buyer made a good faith effort to obtain a mortgage.

Earnest money is usually returned if:

  • The buyer applied on time

  • Provided required documentation

  • Was formally denied by the lender

Earnest money may be at risk if the buyer:

  • Never applied for a loan

  • Withheld financial information

  • Changed jobs or financial status without disclosure

  • Caused their own loan denial

3. What Happens If the Home Doesn’t Appraise?

If the contract includes an appraisal contingency and the property appraises below the purchase price, the buyer may:

  • Renegotiate the price

  • Pay the difference in cash

  • Or terminate the agreement

If properly terminated under the contingency, earnest money is generally returned.

4. Can a Buyer Terminate Due to Title Problems?

Yes.

If a title search reveals:

  • Liens

  • Boundary disputes

  • Ownership defects

  • Easement conflicts

and the seller cannot resolve them within the allowed timeframe, the buyer may terminate and recover their deposit.

5. What If the Buyer Has to Sell Their Home First?

If the contract includes a home sale contingency, the buyer may terminate if their current property does not sell within the agreed period — provided all contract terms are followed.

When Is Earnest Money Returned to the Buyer in Maine?

Earnest money is typically returned when:

  • The buyer terminates within a valid contingency period

  • Financing is denied despite good faith effort

  • The inspection contingency is exercised properly

  • The appraisal contingency is triggered

  • The seller breaches the contract

  • Clear title cannot be delivered

  • Both parties sign a mutual release

In most cases, both buyer and seller must sign a written release authorizing the escrow holder to disburse the funds.

When Does a Buyer Forfeit Earnest Money in Maine?

Earnest money may be forfeited if the buyer defaults on the contract.

Common default scenarios include:

  • Missing contingency deadlines

  • Failing to provide required notice in writing

  • Backing out for personal reasons not covered by contingencies

  • Failing to apply for financing

  • Refusing to close after loan approval

Many Maine contracts include a “liquidated damages” clause allowing the seller to retain the earnest money instead of pursuing further legal action.

Can a Seller Terminate a Purchase and Sale Agreement in Maine?

Sellers generally have fewer termination rights once under contract, but there are some scenarios in which they can terminate, typically due to actions of the buyer (i.e. not paying the earnest money deposit on time).

If a seller attempts to terminate without contractual grounds, the buyer may:

  • Demand return of earnest money

  • Seek damages

  • Pursue specific performance (a court order to complete the sale)

Because of this, seller termination situations often require legal guidance.

How Do You Properly Terminate a Real Estate Contract in Maine?

To properly terminate a Purchase and Sale Agreement in Maine:

  1. Review the contract carefully

  2. Confirm you are within a contingency period

  3. Provide written notice before the deadline

  4. Keep documentation of all communication

  5. Sign a written release for earnest money

Timing and documentation are critical.

Quick Summary: Terminating a Real Estate Contract in Maine

Can you terminate a P&S in Maine?
Yes — if you are protected by a contingency or if the other party breaches.

Will you get your earnest money back?
Usually yes, if termination occurs properly within the contract terms.

Can you lose your deposit?
Yes — if you default or miss contingency deadlines.

Final Thoughts for Maine Buyers and Sellers

A signed Purchase and Sale Agreement is not a casual commitment — it is a binding legal contract. Contingencies provide important protections, but they must be followed precisely.

If you are considering terminating a real estate contract in Maine, consult your real estate professional and, when appropriate, a qualified attorney to understand your rights and obligations.

This article is for informational purposes only and does not constitute legal advice. Always consult a licensed professional regarding your specific situation.