A buyer properly cancels under the inspection contingency. Both parties sign a mutual release. Who receives the earnest money?
Correct Answer
A) The buyer, because cancellation under a valid contingency typically entitles the buyer to a refund
When a buyer properly cancels under a valid contingency, the buyer is typically entitled to a refund of the earnest money.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
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.
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