Is a temporary certificate of occupancy reason to cancel a home purchase

If you do not have a full CO on the day of closing, that is a condition that you can use to back out of a contract because the home is not ready for occupancy.  With the temporary CO there will be a list of things that have to be completed before the full CO will be issued.  You can make the closing conditioned on the completion of those items and reschedule a date.  Or you can get an estimate as to the cost for completion of those items and either get a reduction in the price of the house, or a credit back after closing, and go ahead with the purchase.