Writing a Good Real Estate Contract Termination Letter
Writing a Good Real Estate Contract Termination Letter (with Sample) Use this sample real estate contract termination letter as a template for your formal notification. Last updated on January 15th, 2019
The most common reason people want to cancel a real estate contract is because they believe they are not being properly represented by the agent. The first step a client should take is to talk to the real estate agent and express his or her concerns.
The client may have unrealistic expectations about selling the property and need to better understand the procedures. If the agent refuses to consider the request, the client can call the owner of the agency.
He or she may agree if the house is not near closing or in escrow. This may solve the issue. However, in the United States, a client cannot break a contract without proper justification. If the client wants to break a signed real estate contract, they need to send a contract termination letter that clearly states the justification.
The wording in a real estate contract varies from state to state and may vary within a state in different counties. Many contracts can be canceled by mutual consent, but this should be written in the termination clause of the contract. If the agency is a large national agency, it may allow a client to cancel one contract with a particular agent if they are willing to sign another one with the same company and a different agent.
The termination clause will give the conditions under which the seller can cancel the contract, and the clause should also include the procedure. There may also be a dispute resolution clause that identifies the procedures for dealing with problems in the client/agent relationship.
Breach of Contract
In many states the only way to cancel a real estate contract other than by mutual consent is because of breach of contract. The client may need to study the actions of the agent to determine if he or she has committed breach of contract. The duties of the agent will most likely be outlined in the contract.
For example, the contract may stipulate the number of time the agent should show the house in a month, or the number of ads that should appear in a local paper. If the agent has not fulfilled these contract stipulations, the client can legally break the contract.
If the client needs to send a contract termination letter, to get released from the contract, the letter should be written in formal business style and sent by certified mail. The client should keep the return request receipt.
Commissions to Pay
There are usually commissions to pay when a real estate contract is terminated. Just because the contract is void, doesn’t mean the client doesn’t have to pay commission fees, especially if the agent brought the buyer to the seller.
There may be a commission or compensation section of the contract that includes a disclaimer that requires the client to pay a commission to the agent if the agent procured the buyer within a specified time after the contract ends. Even if there isn’t this clause, if the agent can prove that his or her efforts were directly connected to the purchase or sale of the house, the client may still be liable to pay a commission.
The client should be very careful not to breach the contract before going through the proper channels. Breach of contract could give the agent or broker a reason to file a lawsuit against the client.
For example, once the house is in escrow, the client can’t fire the agent and refuse to pay the earned commission. It should also be noted that filing a suit against a real estate agent for acting in bad faith is expensive, time consuming and rarely has a good outcome for the client.
The client should also not enter into a contract with another real estate broker until the previous contract is completely void. If the client does this, they may need to pay two commissions when the house is sold.
Below is a sample real estate contract termination letter.
Sample Real Estate Contract Termination Letter Name of Client Address of Client City, State, Zip Code
Name of Agent or Broker Name of Real Estate Company Address of Real Estate Company City, State, Zip Code
RE: Termination of real estate contract
Dear Name of Agent of Broker:
This letter is a formal request to terminate the contract between Name of Real Estate Company and myself for selling the house at Address of House. I entered into the contract with you on DATE, and it specifically states that you would show the house to potential buyers at least three times per month.
You have not shown the house even once for the past two months, which, according to the termination clause on the contract, entitles me to terminate it. I would like to try to sell the house myself.
Kindly sign the enclosed termination document and return it to me by DATE. If you have any questions, I can be reached at Phone Number or at Email Address.
Sincerely, Signature of Client Printed Name of Client List of Enclosures: Signed termination document