Updated August 16, 2026
It depends entirely on where the deal was in the contingency timeline. Before contingencies are released, a buyer can generally terminate for the reasons the contract allows and recover their deposit — that is the bargain a seller makes in exchange for the buyer spending real money on diligence. After contingencies are released, the deposit typically goes hard, meaning it becomes non-refundable, and a buyer who walks forfeits it. That release is the actual milestone in a commercial escrow. An accepted offer is a beginning; a released contingency is a commitment.
Offer accepted, escrow opened. The buyer deposits earnest money, generally refundable. The seller's exposure is time.
Due diligence period. The buyer inspects, reviews financials and leases, orders their appraisal and environmental report, and pursues financing. They can typically terminate and recover the deposit. This is the period a seller should keep as short as the buyer can realistically manage.
Contingencies released. The deposit goes hard. Now the buyer is committed and the seller has meaningful protection.
Financing contingency, if separate. Some deals keep a financing contingency alive past the general diligence period. A seller should understand exactly what remains outstanding, because a live financing contingency means the deal is not yet firm regardless of what else has been released.
Close of escrow. Funding and recording.
The deposit is usually the seller's remedy. Most commercial purchase agreements provide for liquidated damages — the seller keeps the deposit and that is the extent of the recovery.
Specific performance is occasionally available but rarely pursued. Forcing a buyer to close is slow, expensive, and clouds the title while it runs. Most sellers take the deposit and re-market.
Release of the escrow requires cooperation or a process. A buyer who disputes the forfeiture can hold up the release, which is one reason clear liquidated damages language matters.
Sellers focus on the money. The damage is usually the time.
Market time accumulates. A building that has been in escrow for 60 days and comes back out carries a question every subsequent buyer asks.
Buyers assume something was found. Whether or not anything was. The second round of buyers begins their diligence looking for what the first buyer supposedly discovered.
Your leverage decreases. The backup buyers may have moved on, and re-marketing from a position of visible difficulty is harder than launching cleanly.
Timelines that depend on the sale break. A 1031 exchange is the sharpest example — the identification and closing deadlines do not extend because a buyer defaulted.
Qualify the buyer harder than the offer price tempts you to. Proof of funds, evidence of the equity source, the lender's name and term sheet, and a track record of closing similar deals in Los Angeles. The highest price from an unproven buyer is frequently worth less than a slightly lower price from someone who closes.
Shorten the diligence period. Every additional day is free optionality for the buyer. Experienced buyers can complete diligence on a stabilized LA building faster than the periods they typically request.
Structure a meaningful deposit, and stage it. An initial deposit that increases when contingencies are released aligns the buyer's commitment with the seller's exposure.
Front-load the information. Give buyers the rent roll, operating statements, leases, registry history, permits, and condition reports before they bid. A buyer who bids on complete information has far less to discover — and discovery is what causes both retrades and terminations.
Keep the backup offer warm. The most effective protection available. A seller with a credible backup has options; a seller without one is negotiating with the only buyer left.
Focus on the contingency structure rather than the headline price. A shorter diligence period, a staged deposit that goes hard on a defined date, and a buyer whose funds and track record you have actually verified will protect the transaction far more than a large deposit on a long timeline. And prepare the information package before you list — the single biggest driver of buyers walking is finding something in week four that could have been disclosed in week zero.
Can I keep the deposit if the buyer's loan falls through?
It depends on whether a financing contingency was still in effect. If it was live, the buyer typically recovers the deposit. If it had been released, the failure of financing is generally the buyer's risk and the deposit is at stake. This is exactly why sellers should know precisely which contingencies remain outstanding at every point.
Should I keep showing the building while it is in escrow?
Many sellers continue to accept backup offers in writing. It does not interfere with the primary buyer, and it means that if the deal fails you are not restarting from zero. Discuss the approach with your broker so it is handled without signaling doubt to the buyer under contract.
How long should a due diligence period be on an LA apartment building?
Shorter than most buyers initially request. Experienced buyers of a stabilized building can complete meaningful diligence quickly when the seller has prepared the information in advance. Long periods are usually a symptom of an unprepared package or an under-committed buyer.
Michael Sterman is Senior Managing Director Investments at Marcus & Millichap.
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