Escrow Cancellation Letter Sample

In this article, I’ll share my personal experiences and provide a step-by-step guide, complete with a template, to help you write your own escrow cancellation letter confidently.

Key Takeaways

  • What You Need: Details about the escrow agreement, reasons for cancellation, and any supporting documents.
  • Steps to Follow: Gather information, state your intention clearly, include all necessary details, and use a professional tone.
  • Template Provided: A customizable template to get you started.
  • Best Practices: Ensure accuracy, be concise, and maintain professionalism.
  • Real-Life Tip: Always confirm receipt of your letter to avoid disputes about whether the cancellation was communicated.

Understanding Escrow Cancellation



Escrow is a crucial part of real estate transactions, acting as a neutral third party to hold funds and documents until all conditions of a sale are met. 

However, circumstances change, and it may become necessary to cancel the escrow. Reasons for this can range from a failed home inspection to financing issues, or simply a change of heart by one of the parties involved.

Step-by-Step Guide to Writing an Escrow Cancellation Letter

1. Collect Necessary Information

  • Escrow Number and Details: You’ll need the escrow number and any other identifying information to reference the specific transaction.
  • Contract Information: Include details of the agreement, such as the date of the agreement and the names of all parties involved.

2. Clearly State Your Intention

  • Start the letter by stating clearly that you intend to cancel the escrow agreement. Mention the date from which the cancellation should be effective.

3. Explain the Reason for Cancellation

  • Provide a clear and concise explanation of why you are cancelling the escrow. This could be due to unsatisfactory property inspection, inability to obtain financing, or other legal impediments.

4. Reference Relevant Clauses

  • If applicable, reference specific clauses in your agreement that support your right to cancel the transaction.

5. Attach Supporting Documents

  • Include any relevant documents that support your reasons for cancellation, such as inspection reports or communication from financial institutions.

6. Include Settlement Instructions

  • If there are any terms regarding the settlement of funds in escrow, state them clearly. Specify any financial obligations that need to be settled as part of the cancellation.

7. Close with Your Contact Information

  • Provide your contact details for any follow-up communication. This includes your phone number, email, and mailing address.

8. Professional Closing

  • End with a professional closing statement and your signature.

Template for an Escrow Cancellation Letter

[Your Name]
[Your Address]
[City, State, Zip Code]
[Email Address]
[Date]


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[Escrow Agent’s Name]
[Title]
[Company’s Name]
[Company’s Address]
[City, State, Zip Code]

Subject: Cancellation of Escrow Account No. [Escrow Number]

Dear [Escrow Agent’s Name],

I am writing to formally request the cancellation of the escrow agreement with the account number [Escrow Number], effective [Date]. This decision has been taken due to [insert reason for cancellation, e.g., “failure to obtain financing as per the contingency outlined in our agreement”].

As per the terms of our agreement, and after consultation with legal and financial advisors, I believe this action to be both necessary and within my rights under the contract clauses [mention any relevant contract clauses].

Attached, you will find all relevant documentation that supports my decision, including [list any documents you are including, such as inspection reports or financial denial letters].

Please confirm receipt of this cancellation request and inform me of any further necessary steps or documents required to complete this process. Additionally, please provide details on the settlement of any funds currently held in escrow.

Thank you for your attention to this matter. Should you need to discuss this further, please do not hesitate to contact me directly at [Your Phone Number] or via email at [Your Email Address].

Sincerely,

[Your Signature (if sending a hard copy)]
[Your Printed Name]

Best Practices and Real-Life Tips

Accuracy Is Key: Always double-check your escrow number and the specifics of the contract clauses you reference. Accuracy in these details can prevent delays or disputes.

Be Concise: While it’s important to be clear about your reasons for cancellation, avoid overly detailed explanations. Stick to the facts that are relevant to the escrow and contractual agreements.

Professional Tone: Maintain a professional tone throughout the letter. This isn’t just good etiquette; it also helps in keeping the communication clear and focused on resolving the transaction smoothly.

Follow-Up: After sending the letter, follow up to ensure it was received. This can be crucial if timelines are tight or if the cancellation is close to key transaction dates.

Frequently Asked Questions (FAQs)

Q: What is the most common reason for writing an escrow cancellation letter?

Answer: In my experience, the most common reason for writing an escrow cancellation letter is the failure of one party to meet the contingencies outlined in the contract, such as securing financing or a satisfactory home inspection.

Q: How quickly should I expect a response after sending an escrow cancellation letter?

Answer: From what I’ve seen, responses can vary, but typically, you should expect a reply or acknowledgement within 5 to 7 business days. It’s essential to follow up if you don’t hear back within that timeframe.

Q: Is it necessary to have legal assistance when drafting an escrow cancellation letter?

Answer: Yes, I always recommend consulting with a legal professional when drafting an escrow cancellation letter. This ensures that all legal bases are covered and your rights are protected under the contract.

Q: Can I cancel escrow without facing any penalties?

Answer: Cancelling escrow without penalties largely depends on the terms of your agreement and the reasons for cancellation. If cancellations are made within the contingencies of the contract, typically no penalties apply. However, it’s crucial to review your contract carefully.

Q: What should I include in an escrow cancellation letter to make it effective?

Answer: To make an escrow cancellation letter effective, I always include the escrow number, detailed reasons for cancellation, references to specific contractual clauses, any supporting documents, and a clear statement of any required settlement actions. This clarity and completeness can prevent misunderstandings and delays.

Q: How do I ensure my escrow cancellation is legally binding?

Answer: Ensuring that your escrow cancellation is legally binding involves clearly stating your intentions, citing relevant contract clauses, and providing necessary documentation. Also, having a legal professional review your letter before sending it adds an extra layer of security.

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