Contracts
In New Jersey, 'novation' in a real estate contract occurs when:
AThe contract is modified slightly by the parties
BA new party is substituted into the contract with the agreement of all parties, releasing the original party✓ Correct
CThe contract is voided due to a new law
DThe closing date is extended
Explanation
Novation is the substitution of a new party or obligation for an existing one with the consent of all parties. When a new buyer takes over a purchase contract and the seller releases the original buyer, novation has occurred.
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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.
Purchase AgreementA legally binding contract between a buyer and seller that outlines the terms and conditions of a real estate sale.
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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