A release of earnest money form is a document that contains the permission of both parties to the fillable purchase agreement template to release the money put on an escrow account. It might happen when the inspection of the real estate shows some significant issues, the buyer cannot get the financing for the purchase of a home, or in some other cases. Considering that real estate contracts are typically stacked in the buyer’s favor, they have an escape route, except for some situations.
Last Updated: October 2026. This guide is reviewed and updated regularly to reflect current law. If you notice an error or outdated information, please contact us.
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Earnest money is money put on an escrow account that indicates the buyer’s serious intention regarding the purchase of the seller’s real estate. Essentially, this money is deposited to make the seller feel more secure about the deal and lessen the blow in case the deal falls through. For instance, the seller might rely on earnest money as a source of paying the next month’s mortgage if they expected to sell their home to the buyer who would cover the next month’s payment, but the deal failed.
A buyer might want the earnest money released in several cases:
When an earnest money deposit is given to an agent or broker, this person becomes an escrow agent, and the deposit is put in an escrow account. An escrow agent is responsible for the earnest money release once the parties provide written permission to do that, or there is a respective court order.
Walking away from the deal by the buyer is possible in several cases. The important thing for them is to act within the agreed timeline and purchase agreement. Before you decide, read the contingency clauses and other terms in your own contract.
When there is an issue during due diligence
The inspection period might take up to several weeks, which should be specified in the purchase agreement. But there might be plenty of issues that might arise within this period: title or land survey errors, low appraisal, etc. If any of those are found during the inspection, the buyer is entitled to terminate the purchase agreement.
When there are financing issues
If the purchase agreement is contingent on the buyer’s ability to obtain financing, they will generally have 2-3 weeks from the effective date of the agreement to get the loan.
The failure to do it will result in the termination of the purchase agreement.
Termination of the deal by the seller
In some cases, the seller might want to not proceed with the deal for their personal purposes. In this case, the earnest money will also go back to the buyer.
Low appraisal
If the purchase agreement contains the appraisal contingency, the buyer is entitled to get their earnest money back provided the home appraisal shows a lower rate than the price offered by the buyer and the seller doesn’t want to lower the cost.
Unsatisfactory home inspection results
It is critical for a seller to list all the faults of the home they sell in disclosures attached to the purchase agreement. But if there is a defect that was not disclosed by the seller. the buyer might get their earnest money deposit back. However, this occasion is quite rare. Typically, the faults found within the home inspection result in the seller presenting a lower price.
Change of heart during the final walkthrough
Despite the fact a final walkthrough is not mandatory, it is prudent to conduct one before closing the deal. If the home inspection detected some serious flaws and the seller took an obligation to fix those, the buyer should check whether or not the necessary fixes were made. If not, the buyer is entitled to terminate the contract and get their money back.
However, it might be a slippery road. The seller might have done the agreed fixes, but the buyer is not satisfied with what they see. In this situation, if the buyer decides to back out, the seller might take the earnest money.
Three steps separate buyers from having their earnest money released. Work through them in order, and keep a copy of every message, signed page and receipt along the way, so you can always show what was sent.
Checking the purchase agreement
First, the party wishing to release earnest money should make sure they are eligible for it according to the original purchase agreement. For instance, if the buyer wants to back out due to significant issues found by the inspector, they should do it before the inspection contingency deadline ends.
In case there are any reasons for the buyer to change their decision, it is important to contact the seller in a written form and explain the situation to them.
Preparing and signing an earnest money release form
After negotiating the wish to release the earnest money, both the buyer and seller should sign a release form. This earnest money contract will be the proof of the seller’s consent to return earnest money to the buyer. It is prudent to contact a realtor or lawyer to figure whether there are any other forms that should go with the release form.
Indemnification. This section of the document should state that the parties are held harmless by the release from liability under the original purchase agreement.
Questions about the form. Ask an attorney if any wording in the release is unclear.
Consulting the escrow agent
When the release form has signatures of both parties, it’s time to make it known to the escrow or title company. The escrow agent should be alerted about the buyer backing out of the deal and receive the release forms. Some time should go by to let the escrow agent process the request. If everything is fine, the earnest money will be returned in a short period of time.
Before you send the release, gather these items in one folder:
Follow these five steps to complete the FormsPal release of earnest money template. The form runs two pages, and each step below matches one part of it, from the first page to the signature blocks.
The screenshots under each step show the FormsPal Release of Earnest Money Contract template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Opening paragraph: date and parties. Enter the date of the Release, then the name and mailing address of the Buyer, the Seller and the Escrow Agent who holds the deposit.
Recitals: the Agreement and the Deposit. Enter the date of the original purchase contract, the street address of the property and the amount of the earnest money deposit held in escrow or trust.
Section 1: who receives the Deposit. Check the box for each recipient, Buyer, Seller or another payee, and write the dollar amount for each. If you use the third line, add the payee's name. Sections 2 to 5 that follow are fixed text with nothing to fill in.
Signatures: Buyer and Seller. Under BUYER and SELLER, each party signs on the By line and prints a Name and Title.
Signatures: Escrow Agent. The Escrow Agent signs on the By line and prints a Name and Title under ESCROW AGENT.
It is a short document, similar to an addendum to real estate purchase contract, that tells the escrow company where the earnest money funds should go. This template has spaces for the people involved, the original contract, the deposit amount and the signatures.
The template asks for these entries:
The template ends with three signature blocks, one for each person named on the first page. Each block has space to sign and to print a name.
Yes. Create the document online with FormsPal, or download the PDF and fill it in with the FormsPal PDF editor before you print it.
Use the Create and Print Online Now button on this page to build the document online. You can also download the blank template as a PDF file or a Word file from the box at the top of the page.
No. The screenshots use sample names, addresses and amounts, so they only show where each answer goes on the page.
Keep a signed copy of the release with your records. Then send the signed release to the company that holds the earnest money.
General information, not legal or tax advice.
