Contracts
Earnest money in an Arkansas real estate transaction:
AIs legally required for a valid contract
BIs not legally required but demonstrates the buyer's good faith✓ Correct
CMust equal exactly 1% of the purchase price
DBecomes non-refundable the moment the contract is signed
Explanation
Earnest money is not legally required to form a valid contract (consideration can take other forms), but it is customary and demonstrates the buyer's seriousness. Its refundability depends on the contract terms.
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Key Terms to Know
Earnest Money
A deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Option ContractA contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
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