Contracts
What is the effect of an option contract in New Mexico real estate?
ABoth parties are obligated to complete the transaction
BThe seller must sell if the buyer exercises the option, but the buyer is not obligated to buy✓ Correct
CNeither party has any obligation
DThe buyer must purchase within a specified time or lose their earnest money
Explanation
An option contract binds the seller to sell during the option period at the agreed price if the buyer chooses to exercise the option. The buyer has no obligation to exercise—it is a unilateral 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.
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.
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.
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