What happens to earnest money in Arizona when a buyer properly exercises a contingency to cancel a purchase contract?
Correct Answer
B) The earnest money is returned to the buyer
When a buyer properly exercises a contingency in Arizona, the earnest money is returned to the buyer since the cancellation is within contract terms. Option A is incorrect as sellers only keep earnest money when buyers breach contract terms. Option C is incorrect as splitting is not the standard practice for proper contingency exercise. Option D is incorrect as brokers don't receive earnest money in these situations.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
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