Contracts
In New Mexico, a 'release of earnest money' form is signed when:
AThe transaction closes successfully
BThe transaction does not close and both buyer and seller agree on how the earnest money should be distributed✓ Correct
CThe buyer deposits additional funds
DThe listing is extended
Explanation
When a transaction fails to close, the parties must agree on the disposition of earnest money. A release form, signed by both buyer and seller, directs the escrow holder on how to distribute the funds — either to the seller as damages, returned to the buyer, or split.
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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.
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.
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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