Contracts (alternative)
In Maryland, a novation in a real estate contract occurs when:
AA new contingency is added to the original contract
BA new party is substituted for one of the original parties with the consent of all parties✓ Correct
CThe contract price is reduced
DThe earnest money is refunded
Explanation
Novation occurs when all parties agree to release one original party and substitute a new party, with the new party assuming all obligations and rights under the contract.
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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.
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