Contracts
Which of the following is an example of 'earnest money' in a real estate transaction?
AThe down payment deposited at closing
BA good-faith deposit made by the buyer when submitting an offer to purchase✓ Correct
CThe buyer's final mortgage payment
DThe seller's contribution to closing costs
Explanation
Earnest money is a deposit made by the buyer along with their offer to demonstrate good faith and serious intent to purchase. It is held in escrow and applied toward the purchase price at closing.
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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.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
ContingencyA condition in a purchase contract that must be satisfied before the sale can proceed to closing.
Math Concepts
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