Terminating in the Option Period vs Terminating for Financing
Both exits use the same one-page notice. Which box gets checked decides the timing, the paperwork, and the money.
Box (1): the option period
What it is. The unrestricted right of the buyer to terminate under Paragraph 5. No reason is stated on the form and none is required.
Timing. By 5:00 p.m. local time where the property is located, on the last day of the Option Period. The date does not move for a weekend or a holiday.
Money. ¶5B: the option fee is not refunded, and the escrow agent releases any option fee still held to the seller. Any earnest money is refunded to the buyer.
Attachments. None.
Box (2): Buyer Approval could not be obtained
What it is. The buyer cannot obtain Buyer Approval under the Third Party Financing Addendum. Buyer Approval is the lender clearing the borrower: the loan terms described are available and the lender determines the buyer has satisfied its requirements on assets, income, and credit history.
Timing. Within the number of days after the Effective Date written into 40-11 ¶2A. Paragraph 2 of that addendum makes time of the essence and requires strict compliance.
Money. The 40-11 states the earnest money will be refunded to the buyer.
Attachments. Required. The 38-8 box states that the buyer has delivered to the seller the lender's written statement setting out the reasons for the lender's determination.
Box (3): the property did not satisfy Property Approval
What it is. The lender determined the property does not satisfy its underwriting requirements for the loan, including appraisal, insurability, and lender-required repairs.
Timing. 40-11 ¶2B: on or before the 3rd day before the Closing Date. This one counts backward from closing, not forward from the Effective Date.
Money. Earnest money refunded to the buyer.
Attachments. Required, same as box (2).
The differences that catch people
- The option exit needs no reason and no attachment. Both financing exits require a written lender statement to travel with the notice.
- The option exit and Buyer Approval count forward from the Effective Date. Property Approval counts backward from the Closing Date, so moving closing moves it.
- Silence has a consequence on the financing side. Under 40-11 ¶2A, if the buyer does not terminate in the window, the contract is no longer subject to the buyer obtaining Buyer Approval. Under ¶2B, if the buyer does not terminate, Property Approval is deemed to have been obtained.
- The 38-8 has other boxes for other exits: the property owners association addendum, 7B(2) on the Seller's Disclosure Notice, the lender's appraisal addendum, and 6D where timely objections were not cured by the end of the Cure Period.
The notice is not the money
The 38-8 prints it in bold at the bottom: this notice is not an election of remedies, and release of the earnest money is governed by the contract.
Release runs through ¶18. Either party or the escrow agent may send a release of earnest money; if one party makes written demand and the other does not deliver written objection to the escrow agent within 15 days, the escrow agent may disburse to the party making demand, reduced by unpaid expenses. ¶18D: a party who wrongfully fails or refuses to sign a release acceptable to the escrow agent within 7 days of receiving the request is liable to the other party for damages, the earnest money, reasonable attorney's fees, and all costs of suit.
Stop counting days by hand
Drop your contract in at recontract.ai and every deadline computes itself: the Effective Date read off the execution block, the option period at 5:00 PM, the 3-day money window with the weekend rule already applied, the financing date off the 40-11, and the Closing Date. It is free, and the file is parsed in your browser.