Buying or selling a home in Michigan does not always end at the closing table. Sometimes circumstances change after a purchase agreement has been signed, and the buyer and seller agree that the transaction should not move forward.
A Mutual Release is the document commonly used to put that agreement in writing. It can also address what happens to the buyer’s earnest money deposit. Understanding what you are signing can help you see more clearly how the transaction is being brought to an end and what happens next.
What Is a Mutual Release in Michigan Real Estate?
A Mutual Release is a written agreement used when the buyer and seller agree to release each other from a purchase agreement.
The important word is mutual. Both parties must agree to the terms of the release and sign the document before it becomes a mutual agreement.
Once completed, the Mutual Release documents that the parties have agreed to terminate the purchase agreement according to the terms stated in the release.
Michigan Mutual Release Video Walkthrough
In the video below, I walk through the Mutual Release and explain the major parts of the form in plain English.
Why Would a Buyer and Seller Use a Mutual Release?
There are several situations where a real estate transaction may not move forward as originally planned.
A buyer may have an issue involving financing, an inspection, an appraisal, or another contingency in the purchase agreement. In other situations, the buyer and seller may simply reach an agreement that ending the transaction is the appropriate course of action.
The reason matters because the rights and obligations of the parties depend on the purchase agreement and the circumstances involved.
What Happens to the Earnest Money Deposit?
One of the most important parts of a Mutual Release is often the disposition of the buyer’s earnest money deposit.
The form can provide written instructions regarding how the earnest money is to be handled. Depending on the circumstances and the agreement between the parties, the deposit may be returned to the buyer or handled in another way agreed upon by the parties.
This is one reason buyers and sellers should read the Mutual Release carefully rather than assuming that signing it automatically determines who receives the earnest money.
Does Signing a Mutual Release Cancel the Purchase Agreement?
A properly completed Mutual Release is intended to document the parties’ agreement to release each other from the purchase agreement according to the terms written in the release.
Before signing, make sure you understand exactly what is being released and any additional terms contained in the document.
Once both parties have signed, you want the written document to accurately reflect the agreement you believe you have made.
What If the Buyer and Seller Do Not Agree?
A Mutual Release depends on both sides reaching an agreement.
If one party wants to terminate the transaction and the other party does not agree to the release or to the disposition of the earnest money, the situation may not be resolved simply by presenting a Mutual Release.
The purchase agreement, contingencies, deadlines, and specific circumstances can all become important. When there is a disagreement involving contractual rights or earnest money, buyers and sellers may need appropriate legal guidance.
Why Work With Doug Hansen?
Real estate forms can be much easier to understand when someone takes the time to explain what you are looking at and how the documents fit into the overall transaction.
With more than 35 years of real estate experience, I help buyers and sellers understand the process, the documents involved, and what to expect as they move from one step of the transaction to the next.
Frequently Asked Questions About a Michigan Mutual Release
What is a Mutual Release in a Michigan real estate transaction?
A Mutual Release is a written agreement used when the buyer and seller agree to release each other from a purchase agreement according to the terms stated in the release.
Do both the buyer and seller have to sign a Mutual Release?
Because it is a mutual agreement, both parties generally need to agree to and sign the Mutual Release for it to reflect an agreement between the buyer and seller.
Does a Mutual Release automatically return the earnest money to the buyer?
No. The Mutual Release can include instructions for how the earnest money deposit is to be handled. Buyers and sellers should read those terms carefully before signing.
What happens if the buyer and seller disagree about the earnest money?
If the parties cannot agree about the release or disposition of the earnest money, the issue may not be resolved simply by presenting a Mutual Release. The purchase agreement and circumstances of the transaction become important, and legal guidance may be appropriate.
Should I read the original purchase agreement before signing a Mutual Release?
Yes. The Mutual Release relates directly to the purchase agreement being terminated, so understanding the relevant terms, contingencies, and obligations in the original agreement can be important.
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