An option contract states that the option fee will be credited toward the purchase price if the optionee exercises. The option fee is $10,000 and the purchase price is $300,000. If exercised, how much additional money does the buyer owe at closing (ignoring other costs)?
Correct Answer
A) $290,000
With the $10,000 option fee credited to the purchase price, the buyer owes $300,000 - $10,000 = $290,000 at closing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
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