Under the TREC contract, if the buyer terminates within the option period, who receives the earnest money?
Correct Answer
A) The buyer receives the earnest money back in full
When the buyer properly terminates during the option period, the buyer is exercising a contractual right. The earnest money is returned to the buyer in full. Only the option fee (which was already paid to the seller) is non-refundable.
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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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