Contracts
A buyer submits an offer with a financing contingency. The seller accepts. Later, the buyer cannot obtain financing. Which of the following is MOST likely true?
AThe buyer forfeits the earnest money
BThe buyer may cancel and receive the earnest money back✓ Correct
CThe seller can sue the buyer for specific performance
DThe contract automatically converts to a lease
Explanation
A financing contingency protects the buyer. If the buyer cannot obtain financing as specified in the contingency, they may cancel the contract and receive their earnest money back without penalty.
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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.
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.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
Math Concepts
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