Contracts
Under Washington contract law, novation in a real estate context means:
AAdding an addendum to an existing contract
BSubstituting a new party for an original party, releasing the original party from liability✓ Correct
CCreating a new contract while keeping the old one in force
DModifying the price in an existing contract
Explanation
Novation is the substitution of a new party (or new obligation) for an old one, releasing the original party from liability. In real estate, loan assumptions with novation release the original borrower from the debt.
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Key Terms to Know
Option Contract
A contract giving the buyer the right, but not the obligation, to purchase a property at a specified price within a specified time period.
Earnest MoneyA 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.
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