Here is a comprehensive list of questions that real estate agents commonly ask about the Cancellation of Contract form—specifically the CAR Form CC (Cancellation of Contract, Release of Deposit and Joint Escrow Instructions)—with explanations for each:

🔹 GENERAL PURPOSE

  1. What is CAR Form CC used for?
    The Cancellation of Contract (CC) form is used when both buyer and seller agree to cancel a purchase agreement, typically the Residential Purchase Agreement (RPA), and instruct escrow how to handle the deposit and any releases of liability.

🔹 SIGNATURES & AGREEMENT

  1. Do both buyer and seller have to sign the CC form for it to be valid?
    Yes, for the cancellation to be mutual and enforceable, both parties must sign. A one-sided cancellation may not release the other party’s obligations or settle escrow instructions.
  2. Can one party cancel without the other’s agreement?
    Only under specific legal circumstances (e.g., breach of contract, failure to perform, or contract contingencies not met). Even then, a unilateral cancellation may lead to a dispute, and escrow usually won’t release funds without mutual instructions.

🔹 DEPOSIT ISSUES

  1. What happens to the buyer’s earnest money deposit after cancellation?
    The CC form includes a section directing escrow how to release the deposit:
  • To the buyer
  • To the seller
  • Or split between them
  1. Can escrow release the deposit without a signed CC form?
    No. Escrow companies require joint written instructions (such as the CC form) from both parties to disburse the deposit—unless there is a court order or written legal authority.
  2. What if one party refuses to release the deposit?
    Escrow will hold the deposit until both parties sign, or until there’s a judicial or arbitration order. Agents should avoid giving legal advice but can suggest mediation or consulting an attorney.

🔹 CANCELLATION TIMING

  1. When is it appropriate to use the CC form?
  • When contingencies are not met (e.g., loan, appraisal, inspection)
  • When both parties agree to back out for any reason
  • When there’s a mutual mistake or change in circumstance
  • When escrow falls through and both parties want to terminate
  1. Is the contract automatically canceled if contingencies aren’t removed?
    No. Even if a contingency is unmet, the buyer or seller must formally cancel in writing (often via the Notice to Perform or Cancellation of Contract form).

🔹 FORM COMPLETION & PROCESS

  1. Who typically prepares the Cancellation of Contract form?
    Usually the buyer’s agent or listing agent, depending on who initiates the cancellation. Escrow may assist in filling in the deposit release section.
  2. What are “Joint Escrow Instructions”?
    These are instructions given by both parties to escrow telling them how to distribute funds and close out the file. The CC form acts as a joint instruction.
  3. Do I need to attach the RPA to the cancellation form?
    Not required, but it’s good practice to reference the RPA date and terms in the cancellation form for clarity.

🔹 LEGAL & RISK ISSUES

  1. Can an agent sign the CC form on behalf of the client?
    No, unless they have specific written authorization (e.g., power of attorney). Agents must not sign legal agreements for their clients.
  2. Does signing the CC form waive all future claims?
    The CC form may include a mutual release clause, but agents should not interpret this as full legal protection. If there are potential disputes, advise the client to consult an attorney.
  3. Can a party still sue even after signing the cancellation?
    If the CC form does not include a mutual release clause, or if a party believes there was fraud, misrepresentation, or breach, they may still pursue legal action.

🔹 PRACTICAL QUESTIONS FROM AGENTS

  1. Should I cancel the contract first, or remove the property from the MLS?
    Cancel the contract first through the proper form. Only then should the listing status be updated in the MLS. Removing the listing early could cause MLS compliance issues.
  2. How do I explain the cancellation process to my client?
    Explain that both parties must agree, and that nothing is final until the CC form is signed and escrow receives joint instructions. Use neutral language, and avoid giving legal advice.
  3. Do I need to keep a copy of the signed CC form?
    Yes. Keep a signed copy for DRE compliance and file auditing purposes, as required by your broker and for your records.

 

Disclaimer:
The questions and answers provided are for general guidance only and may not cover all details or apply to every situation. If anything is unclear or you need further clarification, please visit car.org for official resources and the most up-to-date information from the California Association of REALTORS®.

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