A real estate contract cancellation form, also called a cancellation letter, is a written document that ends a signed real estate purchase agreement. Buyers and sellers may agree to cancel informally over a phone call or email. However, it is important to cancel the same formally as well to avoid any legal issues later.
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 If you notice an error or outdated information, please contact us.
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A cancellation form or a rescission letter is a legal document that can be executed by the buyer and seller to terminate a real estate purchase agreement. This letter allows them to legally conclude an agreement if they do not wish to execute the same.
The buyer or seller, can express their desire to terminate the contract. These documents usually provide how and when the termination will take place and frees the persons involved from any further liability towards each other. The letter may also provide how the earnest money deposit, if any, is to be treated.
What Can Be the Reasons to Terminate a Purchase Agreement
There can be many circumstances under which buyers and sellers may want to terminate a purchase agreement. The lists below show the reasons that come up most often from each side of the deal, so you can see which ones match your situation.
Buyer’s Perspective
Buyers may want to cancel a real estate contract for many reasons including:
The purchaser finds a cloud on the title, including an unreleased lien or a claim, during a title search.
He or she finds out a fault during the inspection including a plumbing defect or water damage. The person may want to cancel the transaction unless he or she was already made aware of the fault.
The owner of the house does not allow the purchaser or his consultants access to the premises for inspection purposes despite agreeing to do the same in the contract.
Seller’s Perspective
On the other hand, the selling company or individual may also want to cancel a contract for the following reasons:
The selling individual or company gets a higher offer.
The person selling a house is unable to find a replacement home.
There is a change in the circumstances, for example losing a job or being unable to relocate which does not allow the selling party to go through with the sale.
The buyer’s appraisal is lower than the offer price.
What Should Be Included in the Form?
The following information is generally included in a cancellation letter or other such documents. Read through the list before you fill in the template, so you know which details to have at hand.
Party details and date. The cancellation letter should usually, at the beginning of the document, specify the name and mailing address of the parties involved and the date on which the document is made.
Reference to the original contract. The letter will also refer to the original contract which will be terminated through it and mention the date on which the original contract was made.
Property details. The letter will mention the address of the property related to the real estate transaction.
Earnest money release. The letter will generally stipulate how the earnest money deposit made by the buyer will be dealt with. It may also provide when the amount will be released and to whom it will be distributed. The parties may choose to distribute the deposit in parts to multiple individuals. The parties must also send a notice to the escrow agent to inform him about the termination. FormsPal also offers a separate release of earnest money form for the deposit money.
Governing law. The letter will also provide the law it will be governed by. Generally, the governing law would be the same as that of the original agreement.
Signatures. Once all the other details have been filled in, the concerned persons may finalize the termination by signing the letter. Once the document is signed, the individuals are bound by the same and the termination of the purchase contract takes place.
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How to Fill Out the Real Estate Contract Cancellation Template
These steps follow the FormsPal real estate contract cancellation template on this page, and filling it in takes only a few minutes. If you download the PDF, you can complete it with FormsPal’s PDF editor.
The screenshots under each step show the FormsPal Real Estate Contract Cancellation template filled with sample entries in blue, so you can see where each answer goes. The names, addresses, dates and amounts are examples only.
Date, Buyer and Seller. On page 1, find the opening paragraph. Enter the date of the cancellation in the first blank. Then write the buyer’s full name and mailing address, followed by the seller’s full name and mailing address.Step 1: sample entries, not a real document.
Recitals: the original contract. In the first recital, enter the date of the original purchase contract and the street address of the property. Section 1 below the recitals is printed text, so there is nothing to fill in there.Step 2: sample entries, not a real document.
Section 2: release of the deposit. Write each dollar amount and the name of the person who receives it on the blank lines under Section 2. There are three lines, so fill in only the ones you need. The form also says the buyer and seller notify any escrow or settlement agent. The document must provide how the earnest money has to be distributed. The parties may choose to distribute the money among multiple people.Step 3: sample entries, not a real document.
Buyer and Seller signature blocks. On page 2, the buyer and the seller each sign on the By line and print a name and a title. The form has no other signature lines. Once all the other details have been finalized, the parties must sign the document. The buyer must sign it in the space provided next to the term “BUYER” and the seller must sign it in the space provided next to the term “SELLER.”Step 4: sample entries, not a real document.
Keep a signed copy of the cancellation together with your original purchase contract, so you can find both quickly.
How to Sign and Use the Real Estate Contract Cancellation
Termination of a standard real estate sales contract may not be a straightforward task. If a party is not careful, he or she may breach the terms of the contract. These steps cover the whole cancellation, from the first talk with the other side to the final payout of the deposit. The form you filled out above comes in once both sides agree to end the contract.
Negotiate a mutual rescission. The first step is to ensure that both, the purchaser and the seller, are ready to rescind the contract. They have to work together to invalidate the real estate contract and agree upon the terms on which the rescission will take place. The party that wants to cancel may send a letter to the other party stating the reasons for termination and formally request the other party to cancel. After a successful rescission, each party will be restored to the position they held before signing the contract.
Check the contract. At this point, the party that wants to cancel must search for a reason to cancel in the original agreement. Sometimes the agreement itself may provide a reason for termination. For example, the buying individual or company finds a fault during the inspection period or the owner does not allow the purchaser to access the land for inspection. The contract may provide for termination under these circumstances.
In such a case, the seller cannot refuse to cancel the real estate contract. The buying party may also be able to file a lawsuit for breach of contract. A real estate agent or attorney may also be able to help you with this.
Sign the form and distribute the deposits. The final step is to sign the document and distribute the earnest money or any other deposit accordingly. The escrow agent must also be notified about the termination. If the agent holds the deposits, he or she must distribute the same according to the terms of termination. The buying party and the selling party may still have to pay a fee to the agent despite the termination.
What the Printed Sections of the Template Say
Not every provision of the FormsPal template contains a blank for the reader to complete. Four sections of the two-page document consist of printed language that stays unchanged. The list below summarizes what each section addresses, so the buyer and the seller understand the cancellation before they finalize it.
Section 1. States that the purchase contract is terminated as of the date written in the opening paragraph.
Section 3. Covers the return of due diligence materials to the seller.
Section 4. Deals with any further duties or liability between the buyer and the seller, apart from obligations that survive the cancellation.
Section 5. Covers governing law and counterparts, including electronic signatures.
Review all four sections together with the other side of the transaction. That way both the buyer and the seller understand how the earnest money and the contract are handled before the cancellation is finished.
Frequently Asked Questions
These answers cover the questions buyers and sellers ask most often while they fill out and use this cancellation form. Each answer refers to the FormsPal template on this page, which is two pages long and has four parts to fill in.
What details do I need before I fill out the form?
Have the date, the full names and mailing addresses of the buyer and seller, the date of the original purchase contract and the street address of the property ready. If a deposit is being released, also write down the amounts and the names of the people who receive them.
How many parts does the real estate contract cancellation template have?
The FormsPal template is two pages long. You fill in four parts, and the rest of the text is printed and needs no entries.
The date, the buyer and the seller
The recitals about the original contract
The release of the deposit in Section 2
The signature blocks on page 2
Can I split the earnest money between several people?
The template has three lines in Section 2, and each line holds one dollar amount and one name. Fill in only the lines you need.
What if my purchase contract has a contingency?
A contingency is a condition written into the purchase contract, such as an inspection or financing condition. The FormsPal template has no line for a contingency. Look at the original contract to see which ones it lists, then enter that contract’s date and the property address in the recitals.
Where does the earnest money go on the form?
The money goes wherever the buyer and seller write it in Section 2. Each of the three lines holds one dollar amount and the name of the person who receives it.
Can I fill out this cancellation form online?
Yes. Select Create My Document to answer a few questions and build the form online, or download the PDF or Word file and fill it in yourself.
Does the template have lines for a notary or witnesses?
The FormsPal template has a signature block for the buyer and one for the seller. Each block has a By line, a Name line and a Title line. It has no separate notary or witness lines.
General information, not legal or tax advice.
Jennifer M. Settles
Author & Attorney
With over 25 years of experience as a business and transactional attorney, Jennifer has mastered the craft of closing highly successful deals for her clients. Through her wide-ranging expertise in commercial contracts, real estate transactions, M&A and corporate law, Jennifer secures results that are second-to-none.
