A buyer in Colorado is purchasing a home using the CREC-approved Contract to Buy and Sell Real Estate. The contract contains an environmental inspection contingency. The buyer discovers the property has a former underground storage tank (UST) on the lot. The buyer timely delivers a written Inspection Termination Notice. Who is responsible for releasing the earnest money to the buyer?
Correct Answer
D) The closing company or title company holding the earnest money, upon receipt of mutual written instructions or proper termination documentation
In Colorado, earnest money is typically held by the closing company or title company (as the escrow holder). When a buyer properly terminates a contract by exercising a contingency — such as delivering a timely Inspection Termination Notice — the earnest money is released by the escrow holder upon receipt of mutual written release instructions from both parties, or in accordance with the contract's termination provisions. The CREC contract specifies the process for earnest money release upon termination.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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