Real Estate Contract Termination Letter Templates

One of the worst-case scenarios for every real estate agent is contract termination. Of course, you can often decide to cancel a real estate contract for various reasons. But, in most cases, you, as the buyer or seller, cannot afford to buy or sell a property or have changed your mind. 

However, contract termination is not something you can conclude with an email notification. Real estate agents require time, effort, and the right approach to address your urgent needs and understand your reasons for taking such action. These reasons will help cancel the agreement easily for your agent and you.

However, Real Estate Contract Termination Letter Template provides a structured and efficient approach to concluding agreements with clarity and professionalism. A proper contract termination requires the correct agreement cancellation form to ensure your protection and regulatory compliance. 

Real Estate Termination Form

You can access various termination forms for ending a real estate contract as the buyer or seller. For example, according to the North Carolina Offer to Purchase and Contract, you, as the seller or buyer of a real estate property, can cancel an agreement by sending a written cancellation letter to your respective realtors.  

The North Carolina Bar Association and the North Carolina Association of REALTORS®, Inc. have made uniform forms for addressing any cancellation scenario possible.

These uniformed termination forms include termination situations for the Standard Form 2-T Offer to Purchase and Contract:

• Form 1 – a seller-to-buyer termination notice that notifies the buyer about the seller’s intentions to terminate the offer to purchase and contract
• Form 2 – a buyer-to-seller cancellation notice that informs the seller that the buyer is withdrawing from the agreement to purchase and contract
• Form 3 – a mutual contract termination agreement that excludes the release of earnest money deposit
• Form 4 – a mutual contract cancellation agreement that includes releasing earnest money deposit

In addition, breach of contract and commission to pay are common alternatives. The former is the only termination option in many states. It refers to situations when you may feel like the real estate agent has breached the contract due to specific actions that go against the responsibilities outlined in the agreement. In such a scenario, you can compose a formal termination letter to notify the agent of the contract breach via verified mail.

The latter refers to mitigating the termination commissions, as you must compensate the agent according to the compensation section of the agreement. 

Although each form complements a specific situation, a real estate termination letter is the most efficient method of canceling the contract.

Since we understand how tedious and time-consuming it can be to write a real estate letter from scratch, we provide free downloadable pre-made real estate cancellation agreement templates for your convenience. In addition, you can customize the templates according to your needs:

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What is Real Estate Termination Letter?

The real estate termination letter is a legal correspondence initiated by the seller or the buyer that terminates the purchase of a property.

As the agreement participants, you can start the legal purchase cancellation process by using a legal document. That document serves as legal protection that releases you and the other participants from the obligations stated in the real estate contract. 

As an official document, the cancellation agreement determines the terms and conditions of the termination process, including the compensation fees and the treatment of the earnest money deposit. Therefore, the termination conditions are vital to your welfare as you determine the liability between you and the agent.

Contract Termination VS. Contract Release

Many people mistake contract termination for contract release. However, these two very different terms refer to different situations for terminating a real estate agreement. 

Agreement cancellation is only possible when one participant uses their legal right to terminate a real estate contract unilaterally. 

Unlike contract termination, which requires actions from one party, contract release is a mutual effort on both the buyer’s and the seller’s part. The contract release frees the seller or the buyer from any responsibilities stated in the real estate agreement. In most cases, you, as the seller, can release the buyer from responsibility for the price of the earnest money deposit. 

Do you know? You can mutually agree if the real estate is not in escrow or near closing. However, US law states that a contract participant cannot terminate an agreement without a justifying reason. 

If you, as the buyer or seller of real estate, believe that the agent is not properly representing you, you have the right to inform the realtor of your concerns. Most buyers/sellers want to cancel the agreement due to unrealistic expectations about the real estate price. In addition, most of them need to familiarize themselves with property selling/buying procedures. 

If a realtor declines the cancellation request, you can turn to the head of the real estate company. You can cancel a real estate agreement by sending a termination letter to the assigned real estate agent. You can decide to cancel a purchase agreement for various reasons that involve different circumstances.  

Buyer’s termination reasons may include:

• During the title research, the buyer may discover an encumbrance that involves any undocumented claim or unreleased lien that could bring the title in question
• The buyer may find damage, defect, or a fault during the property inspection and decide to terminate the contract based on the real estate’s condition
• The property owner refuses to meet the agreed terms stated in the contract, thus breaking the agreement and causing the contract termination

The seller’s termination reasons may include the following:

• The seller receives a better offer
• The property owner has no replacement option for real estate on sale
• The seller undergoes unexpected circumstances that prevent them from executing the sale
• The buyer offers a lower appraisal than agreed

In addition to these reasons, specific situations may lead to contract termination, including:

Bad communication

Lack of communication between you and the agent can cause discrepancies in the mutual effort to conclude the transaction successfully. Therefore, a responsible, professional, and client-centric agent should always ask for your opinion before taking any property-related action. They should keep you informed at every phase of the buying/selling process, including providing regular feedback and market updates.

On the other hand, you should also be upfront with your advocate during the entire buying/selling process. Inform them of the communication type that suits you the most. If you are not satisfied with the results, consider hiring another professional.

Unethical behavior

Ethics are essential in choosing the right real estate agent. Unfortunately, although most real estate professionals invest a lot of effort in developing the best ethical practices, they can occasionally express unethical behavior, as discussed below:

• Making last-minute changes to the initial deal
• Making promises to the buyer without the seller’s consent
• Asking for higher commission rates than agreed

No internet exposure

Whether selling or buying a property, you need internet exposure to attract potential prospects. Since this is your real estate agent’s duty, you should consider switching realtors if you cannot find anything about your buying/selling ad on the internet.

Poor photographs

The quality of real estate photos can be a game-changer. You, as a buyer, can check the property photos before deciding. If the photos need to be more attractive, you can ask for better-quality material. Your agent is responsible for selling the property in the best light.

Mismatched personality

Sometimes, it is impossible to be in sync with a realtor due to mismatched personality traits. If you cannot find mutual ground with your agent, consider hiring another.

Fact check: Real estate contracts include terminology that may vary from state to state. You can usually terminate the agreement by mutual consent as a seller or buyer. However, a clause in the contract should outline the proper cancellation practices. 

On the other hand, national real estate agencies have unique cancellation policies that condition you to terminate contracts under specific circumstances. 

A real estate contract should include two additional sections:

• Termination clause – states the circumstances under which you can terminate the agreement
• Dispute resolution clause – outlines the conditions for handling seller or buyer/agent problems.

Here are the steps you should take to cancel a real estate contract:

Step 1: Mutually make a decision

The best-case scenario is mutually terminating the contract. However, that requires you and the other party to agree to cancel the contract. In addition, you must state valid reasons for contract termination and agree upon mutually beneficial cancellation terms.

Step 2: Review the agreement

Review the original agreement to see whether it includes justifiable reasons for cancellation. Most contracts provide valid termination requirements that you must meet to cancel the agreement. If you do not meet the stated circumstances, you are legally obliged to honor the deal unless there is a breach of contract.

Step 3: Draft the letter

If you, as a seller or buyer, want to terminate the contract and meet the cancellation requirements, you should draft the termination letter using the proper, formal business-styled form.  

Step 4: Sign the letter

The last thing to do is to provide your signature to conclude the termination. Then, finally, the realtor must know of the agreement cancellation to distribute the earnest money according to the agreement.

The following information should be included in a real estate termination letter:

Mention date and details of the party

Include your name and mailing address as well as of the contract participants at the beginning of your termination letter and mention the date on which the note is made. The date should go into the first blank space in the opening paragraph. The next blank space should include the contact details.

Specify the purpose of the letter

The next section of your cancellation note should specify the letter’s purpose. Finally, you should state your intentions to terminate the contract, such as:  

• Loss of employment
• Breach of contract
• Denial of your mortgage application
• Inability to sell your current property
• You are not satisfied with the realtor’s service
• The property inspection deadline is not met
• The terms for repairs or improvements are not set
• Title issues

Refer to the original agreement

Make sure to include a reference to the original contract, which you will cancel through your letter. You must also mention the exact date when the contract was drafted.

Give details of the property

Include all property details relevant to the agreement in your termination letter, including the property’s address. Write the complete street address, city name, state, and ZIP code.

Describe the reason(s) for canceling the contract

Include valid reasons to justify your actions. In some cases, the original contract may provide sufficient reasons for cancellation. For example, as the buyer, you can terminate the original agreement if the seller fails to disclose defects or issues with the property. On the other hand, as the seller, you can cancel an agreement for breach of contract. You should consult with a real estate agent to get some clarification on the matter.

Choose how the earnest money will be distributed

The termination letter should include a clause to determine a method of earnest money release. The clause should stipulate the deposit distribution in Section 2 of the termination letter. You reserve the right to set the conditions for deposit distribution, especially if multiple participants are involved in the contract.

Provide the governing laws

The letter must abide by the same governing law as the original contract.

Add closing remarks

Add closing remarks where appropriate, such as your expectations, contact details, etc. You do not need to make the situation worse, as closing remarks can help ease the tension.

Sign-off

Sign the document with your signature and add your name. You and the other participant must sign the document to make it valid. Depending on your role in the contract, you should put your signature in the space provided next to either “BUYER” or “SELLER.”