• May 11, 2021

Beware of Form 122: ‘Mutual Release’

Regardless, if you are a first time home buyer or a person who has chosen to invest or become an investor in real estate, you should read this first. Real estate agents can also benefit. A reminder that when a person makes an offer on a property, it is exactly that, “their offer”.

As a Buyer, when you bid on a Property, you must remember that this is your offer. When signing the contracts and attaching their Annexes, you must ensure that the clauses are for your benefit. Keep in mind that the realtor is working for himself and therefore to protect himself and not you, the buyer or even the seller in many cases.

What is a Form 122 – Mutual Release?

This is a contract. The Real Estate Agent puts you on the line if they think you are backing out of the original contract, which was entered into to purchase the property. This contract is solely for the benefit of the Real Estate Agent and the Real Estate Company for which the Real Estate Agent works. This contract must be signed by both the ‘Buyer’ and the ‘Seller’. Buyer is requested to sign first. The contract is then passed to the seller for signature.

Here’s the trick. When the Buyer signs the form (that’s you), you automatically let the real estate company release you from returning your deposit money. You have just given up your rights to sue for your deposit, should it come to this. The Real Estate Company then passes this form to the Seller for signature. If they sign it, everything should be fine and your deposit should be returned. If they decide not to sign this contract, you do not get your deposit back. The Seller also does not receive his deposit and it remains in the Real Estate Trust Account. At this point, you will need to sue the Seller for your deposit back.

As you build your clauses in your Schedules, make sure your wording is accurate and precise. One or more of its clauses must clearly establish an irrevocable instruction in the Agreement that addresses the situation. This is the only way you can be sure that we will refund your deposit. Each and every one of the clauses that have to do with an irrevocable timeline or the exemption of a condition (which is an irrevocable timeline) must be followed with a clear statement, saying that the deposit must be returned in full. immediately.

Always have an attorney review your documents. In fact, stay in contact with your Attorney throughout the entire process, to make sure the Contracts will be protecting you at all times.

The reason I suggest this is because you may think you have (and may very well have) a soundproof Contract, which will protect you. While conducting your due diligence on the Property, you discover that some of the terms are unsatisfactory and exercise your right to withdraw from the deal. Keep in mind that the real estate agent does not know how to read the contracts and thinks that he is simply withdrawing from the deal. The real estate agent will refuse to return your deposit money (which is held in trust) and will insist that you sign and complete a form 122 – Mutual Release.

This form is controversial and if you research it, you will find many definitions. Here is mine. The bottom line is that once you sign it, you will have denied your original contract and left it to the seller and the real estate agent to get your deposit back. What the real estate agent does not understand is that the original contract will stand in court. However, it is a huge inconvenience and a waste of time for an investor.

So make sure your contracts are set up correctly, because you never know when you will need that contract to appear before the Court of Justice.

We hope you have found this information enlightening and beneficial for the next time you prepare an offer and build your contract.

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