Oregon Residential Purchase Agreements: Contingencies, Earnest Money, Default, and Exit Rights
A residential sale can come apart quickly. An inspection reveals costly foundation damage, financing fails, or a seller regrets accepting an offer after a better one arrives. Whether either side can leave depends on the signed purchase agreement and what happened under it.
Oregon law supplies certain rights, particularly for seller disclosures and escrowed funds. Most deadlines and remedies come from the parties’ contract. This article examines the January 2026 edition of OREF 001, Residential Real Estate Sale Agreement. Oregon Real Estate Forms, LLC is a private forms provider. Its provisions do not govern every Oregon sale, and an older form, another provider’s agreement, or a negotiated addendum can produce a different result.
Formation and Mutual Acceptance
A purchase agreement requires mutual assent to the same material terms. Oregon’s statute of frauds, ORS 41.580, ordinarily requires an agreement for the sale of real property, or a sufficient memorandum of it, to be in writing and signed by the party against whom enforcement is sought.
The current OREF agreement defines its Effective Date as the date the buyer and seller have signed and accepted the agreement and delivered it to the other party. Delivery to the other party’s real estate agent counts, as does electronic delivery under the form. The signature dates alone may not establish when the agreement became binding.
The form also requires an offer deadline. A seller’s late acceptance does not bind the parties unless they sign and deliver a separate writing expressly extending that deadline. A counteroffer remains a proposal until it is accepted and delivered.
A buyer using the current OREF form can withdraw an offer before the seller transmits signed acceptance. Once the agreement becomes effective, a change of mind alone creates no exit right. The party who wants out needs a contractual or statutory basis, or the other party’s agreement to terminate.
Contingencies and the Right to Terminate
A contingency protects a party only on its stated terms. Some contingencies must be selected, their deadlines run from different events, and their notice requirements vary. Silence can waive one protection while another provision requires further action after the condition fails.
The OREF refund provision covers express contingencies that fail through no fault of the buyer. A buyer who ignores financing requirements or misses a notice deadline cannot safely assume the failed condition protects the earnest money.
Inspection Contingency
The OREF inspection contingency gives the buyer a stated period to complete professional inspections and negotiate over the results. The buyer can request repairs or other corrective action, but the seller has no duty to agree.
A repair request does not extend the inspection period. If the parties have not agreed on repairs, the buyer must deliver timely unconditional disapproval as the contract requires. Otherwise, the current form treats the buyer as having accepted the property as is. OREF explains the notice process in its guidance on OREF 064, Notice of Buyer’s Unconditional Disapproval.
The form also allows a buyer to waive the inspection contingency while retaining the right to inspect for information. That inspection does not restore the waived termination right. OREF addresses intended use, saleability, insurance costs, zoning, and land-use restrictions in a separate suitability provision, so a buyer concerned about those issues should confirm that the provision has been selected and completed.
Financing Contingency
A preapproval letter is not final loan approval. Underwriting can uncover problems with the buyer’s income, debt, assets, or credit, as well as the property’s condition, zoning, or eligibility for the selected loan program.
The January 2026 agreement gives the loan contingency its own approval deadline. If full approval has not arrived by then, or the lender notifies the buyer in writing that the loan cannot proceed, the buyer must promptly notify the seller. The buyer then faces another deadline to reach a written agreement with the seller, waive the contingency, or terminate through the specified procedure. The financing contingency does not simply terminate the transaction when the approval deadline passes.
The buyer must also submit the application, complete requested paperwork, pay required fees, keep the seller informed of material developments, and obtain written consent before changing the lender or loan program. Failure to meet those obligations can undermine a later claim to the deposit. OREF discusses the revised provision in Understanding the Loan Contingency in OREF 001.
Appraisal Contingency
The 2026 agreement separates appraisal from financing, and its appraisal contingency applies only when selected. It gives the buyer a stated period to obtain the appraisal and complete any negotiations with the seller. A missing report, a value below the purchase price, or an appraisal conditioned on further work can trigger the provision, after which the buyer must follow its notice and termination requirements.
A lender can still order an appraisal when the contract has no appraisal contingency. If the lender remains willing to fund despite a low valuation, the buyer has no OREF termination right based on value alone. A lender’s denial based on the appraisal can implicate the loan contingency when its other requirements have been met. OREF addresses that distinction in Loan vs. Appraisal Contingencies—What Changed in the 2026 OREF Forms?.
Title Contingency
A preliminary title report identifies liens, easements, covenants, access rights, and other recorded matters affecting the property. Buyers should read the underlying documents rather than relying on the report’s exception list.
The OREF agreement gives the buyer a stated period after receiving the report to object in writing. A new period begins upon delivery of a supplement containing material information previously unknown to the buyer. Failure to object constitutes acceptance of the report and documents, although the seller must still convey marketable title.
After a timely objection, the seller has a period to correct the matter or give written assurances of correction reasonably satisfactory to the buyer. If the seller does neither, the form terminates the transaction and returns the deposits unless the buyer waives the contingency in writing. An objectionable title exception is not necessarily a defect in marketable title, which makes the contractual objection process important.
The Statutory Disclosure Revocation Right
Oregon’s seller disclosure statute creates rights independent of the inspection contingency. When the statute applies and the buyer has not waived the revocation right in writing, ORS 105.475 gives the buyer five business days after delivery of the seller’s property disclosure statement to revoke the offer. The buyer must deliver a separate, signed written statement disapproving the disclosure.
The current OREF form states that when the seller delivers the disclosure before the Effective Date, the contractual revocation period begins on the Effective Date. If the seller fails or refuses to provide a required statement, the statutory revocation right continues until closing. Closing ends that right. A valid revocation voids the offer and entitles the buyer to immediate return of deposits and other consideration.
The statute contains exclusions and does not govern every residential sale. The disclosure statement also consists of the seller’s representations. It neither establishes that the property is free of defects nor replaces a professional inspection.
Earnest-Money Deposits and Releases
The purchase agreement sets the earnest-money amount, deposit deadline, holder, and terms for any additional deposit. Oregon law imposes no fixed percentage for residential earnest money.
Under the current OREF agreement, missing a required deposit or wrongfully attempting to withdraw one is a breach. The remedy provision reaches deposits paid or agreed to be paid. A buyer therefore cannot create a cost-free exit by withholding the money.
The right to terminate and the authority to release the deposit are separate questions. ORS 696.581 requires an escrow agent to follow the principals’ dated written instructions or written agreement and, subject to statutory exceptions, bars disbursement without adequate separate written instructions. When an escrow holder concludes that an OREF transaction cannot close, the form directs it to retain the deposit until it receives written instructions from both parties or a final ruling from a court or arbitrator.
A valid seller-disclosure revocation is a statutory exception because ORS 105.475 entitles the buyer to immediate return notwithstanding ORS 696.581. Other deposit disputes can outlive the purchase agreement. Any release deserves careful review because it can surrender damage, misrepresentation, and other claims extending beyond the earnest money.
Exercising a Termination Right
A valid termination begins with the provision authorizing it. The party invoking that provision must satisfy its conditions, meet its deadline, use the required notice or form, and deliver it as the agreement directs.
The procedures differ. Under the current OREF agreement, the inspection provisions use a notice of unconditional disapproval, while the loan and appraisal provisions call for a termination agreement and deposit-disbursement instructions. The title provision terminates the transaction when timely objections remain unresolved, and Oregon’s disclosure statute requires its own separate, signed statement.
A repair demand, extension request, or informal statement that a party wants out does not necessarily exercise a termination right. Where no such right exists, the parties can negotiate a mutual termination. That agreement should address the deposit, transaction expenses, continuing obligations, and the scope of any release.
Buyer Default and Liquidated Damages
A buyer who properly terminates under an available contingency has not defaulted merely because the transaction failed. Default becomes the issue when the buyer refuses to close after the applicable protections have expired or been waived.
Under the 2026 OREF agreement, if the seller has accepted the agreement and can furnish marketable title, the seller can elect to terminate and claim the deposits paid or agreed to be paid as liquidated damages for specified buyer breaches. For the buyer’s failure to close according to the agreement’s material terms, the form limits the seller’s remedy to those deposits. That limitation belongs to the OREF contract; it is not an Oregon rule governing every purchase agreement.
The label “liquidated damages” does not make a provision enforceable. In Illingworth v. Bushong, the Oregon Supreme Court adopted the standard in ORS 72.7180 as the starting point for evaluating liquidated-damages provisions generally. The amount must be reasonable in light of the anticipated or actual harm, the difficulty of proving loss, and the practicality of obtaining another adequate remedy. An unreasonably large amount is an unenforceable penalty.
Seller Default and Specific Performance
A seller cannot abandon a binding agreement because a better offer arrives. An unjustified refusal to convey the property or perform another material closing obligation can constitute default.
The current OREF form provides for the return of deposits if the seller fails to furnish marketable title or complete the transaction according to its material terms. It also states that accepting the refund does not waive the buyer’s other available legal remedies.
Depending on the agreement and the facts, those remedies can include damages or specific performance. Specific performance asks a court or arbitrator to compel the promised sale. It is an equitable remedy, and its availability depends on the validity of the agreement, the buyer’s own performance, and the remaining equities.
A buyer who still wants the property should take care before signing a termination or broad release. Those documents can eliminate the right to seek the property along with related damage claims.
Mediation and Arbitration
The signed agreement controls where and how the parties resolve disputes. Mediation seeks a negotiated settlement. Arbitration places the dispute before a private decision-maker whose ruling binds the parties.
The current OREF agreement routes covered claims first to mediation through Arbitration Service of Portland and then to binding arbitration if mediation fails. It contains exceptions, including a separate route for qualifying buyer-seller small claims. For covered claims, the parties also waive trial before a judge or jury.
The form conditions an award of attorney fees in arbitration on the prevailing party having offered or agreed in writing to mediate before, or promptly after, the arbitration filing. Another form can use different procedures or omit mandatory arbitration.
Before declaring default or filing a claim, collect the complete signed agreement and every counteroffer, addendum, notice, and delivery record. Add the inspection, lender, and escrow files. If the transaction is already unraveling, have counsel review those materials before sending a termination or default notice. Our Oregon real estate lawyers can help.
