How should I use revised Form 390-T?
QUESTION: My buyer wants to terminate their purchase contract, but as part of the termination, they also want the Earnest Money Deposit, a return of the Due Diligence Fee, and reimbursement of their inspection costs. My broker-in-charge said I could use the revised Termination Agreement (Form 390-T) to terminate, but the Due Diligence Period ends tomorrow and I’m worried about the Earnest Money Deposit. How should I handle this?
ANSWER: Unless you have negotiated the terms of termination with the listing agent or seller, use Form 350-T (Notice of Unilateral Termination – From Buyer to Seller) to terminate the contract.
Both Form 390-T and Form 350-T were substantially revised as part of the most recent forms update. Form 390-T should only be used after a buyer and seller have negotiated the terms of termination. This is because Form 390-T has always required the signature of both the buyer and the seller in order for the termination to be effective. Form 390-T also has a legal release, which means that once it is fully executed, neither the buyer nor the seller can seek legal action against the other concerning the terminated purchase contract.
To ensure the Earnest Money Deposit is returned to your client, you should terminate during the Due Diligence Period using Form 350-T. When Form 350-T is sent by the buyer during the Due Diligence Period to the seller or listing agent, the Earnest Money Deposit should be returned to the buyer in nearly all circumstances. If you send Form 390-T without first negotiating the terms of termination, and the Due Diligence Period expires, then the seller may claim that the termination was not timely sent and that they are entitled to the Earnest Money Deposit as well as the Due Diligence Fee. This Q&A addresses this kind of claim by the seller in detail.
Form 390-T can be filled out in many ways when there is an agreement to terminate, even if the buyer and seller cannot agree on how the Earnest Money Deposit should be distributed but they agree on all the other terms of termination. If the buyer and seller can agree how to split the Earnest Money Deposit, section 4(a) can be used to allocate disbursement. If the buyer and seller agree on all terms of termination except the Earnest Money Deposit, they can fill out section 4 of Form 390-T indicating that they cannot agree. If the buyer and seller then later agree on how to distribute the Earnest Money Deposit after the form is executed, the parties can use the section below the dotted line at the bottom to distribute the Earnest Money Deposit.
If there is no agreement between the buyer and seller on the terms of termination, then Form 350-T is more appropriate. If sent during the Due Diligence Period, Form 350-T will not only preserve the buyer’s claim to the Earnest Money Deposit, but it will also preserve the buyer’s right to seek other relief against the seller if they wish at a later time.
Release Date: 7/10/2025
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