A Michigan purchase agreement includes an appraisal contingency stating the property must appraise at or above the purchase price of $320,000. The appraisal comes in at $305,000. The seller refuses to reduce the price. Which of the following best describes the buyer's rights under the appraisal contingency?
Correct Answer
A) The buyer may void the contract and recover the earnest money deposit
An appraisal contingency protects the buyer by making the contract contingent on the property appraising at or above the purchase price. When the appraisal comes in below the purchase price ($305,000 vs. $320,000) and the seller refuses to reduce the price to the appraised value, the contingency condition has not been met. The buyer may exercise the contingency, void the contract, and recover the earnest money deposit in full.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
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