The Mutual Release Is Doing Two Things

This week on YouTube I broke down a clause I see occasionally — one that's designed to automatically release the deposit to the seller if the buyer fails to close.

It's well-drafted. It looks airtight. And it doesn't hold up.

If you want the full breakdown, that video is linked here.

But it got me thinking about a nuance worth exploring here with you. 

When a deposit is being held in trust by the listing brokerage, we often say that it can only be released by:

1. The deal closing
2. Signing a Mutual Release
3. A Court Order

And that's not wrong...

There's just a layer underneath it that's worth understanding.

When we say "Mutual Release," we're referring to OREA Form 122.

That form is actually doing two separate things.

The first is a direction — an instruction to the deposit holder telling them where to send the money.

This is what the brokerage actually needs to release the funds.

The second is a release — both parties agreeing not to sue each other for the failed transaction.

But the deposit holder ONLY needs a direction to release the deposit.

That's it.

A document, signed by both parties, telling them where the money goes.

The release of claims between the parties is a separate legal matter.

It's useful, common, and often appropriate, but not a condition of moving the deposit.

Parties can execute a standalone direction without releasing their right to pursue further claims.

And in some circumstances, that distinction matters.

Latest YouTube Video: