Contracts
A novation in a West Virginia real estate contract occurs when:
AThe parties agree to new terms without changing parties
BA new party is substituted for an original party, releasing the original party from liability✓ Correct
CThe contract is amended with an addendum
DThe property is transferred to a trust
Explanation
Novation is the substitution of a new party (or new obligation) for an existing one, with all parties' consent, releasing the original party from liability. In real estate, it occurs when a buyer formally assumes a mortgage and the original borrower is released.
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Key Terms to Know
Purchase Agreement
A 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.
Deed of TrustA security instrument used in many states instead of a mortgage, involving three parties: borrower (trustor), lender (beneficiary), and a neutral trustee.
Earnest MoneyA deposit made by the buyer when submitting a purchase offer, demonstrating serious intent and serving as consideration for the contract.
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