Contracts
An Iowa purchase agreement includes a financing contingency. If the buyer cannot obtain financing, what is the likely outcome?
AThe buyer forfeits the earnest money
BThe seller may sue for specific performance
CThe buyer may cancel the contract and recover the earnest money✓ Correct
DThe contract automatically converts to a lease
Explanation
A financing contingency protects the buyer. If the buyer cannot obtain financing on the stated terms, the buyer may cancel the contract without penalty and recover the earnest money deposit.
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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.
Math Concepts
State-Specific Concepts
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