A buyer enters into a TREC One to Four Family Residential Contract with a 10-day option period. The buyer pays a $200 option fee. On Day 6, the buyer terminates the contract within the option period. The buyer also deposited $5,000 in earnest money. What happens to these funds?
Correct Answer
C) The seller retains the $200 option fee, and the buyer receives back the $5,000 earnest money
When the buyer terminates within the option period, the option fee (which has already been delivered to the seller) is non-refundable—the seller keeps the $200. However, the earnest money is returned to the buyer because the buyer exercised a valid termination right under the contract.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A bilateral contract is an agreement in which both parties exchange promises and are both obligated to perform, while a unilateral contract is one in which only one party makes a promise and the other party is not obligated to act.
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
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Under the TREC contract, all of the following contract terms may be changed through a TREC Amendment EXCEPT:
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Previous Question
In a Texas real estate transaction using the TREC One to Four Family Residential Contract, the buyer agrees to purchase a home for $350,000 with a 7-day option period. On Day 5, the buyer's agent discovers that the property is in a flood zone. The buyer's agent should advise the buyer that:
Next Question
Under Paragraph 18 of the TREC One to Four Family Residential Contract, what happens if any provision of the contract is found to be invalid or unenforceable?