A Texas buyer deposits $7,500 in earnest money and pays a $350 option fee. The contract closes successfully. At the settlement statement, how are these funds treated?
Correct Answer
A) Both are credited toward the buyer's purchase price
At closing, both the option fee and earnest money are credited toward the buyer's purchase price. The option fee credit and earnest money credit reduce the amount of cash the buyer needs at closing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Novation is the substitution of a new contract for an existing one, or the replacement of one party with a new party, with the consent of all parties involved. The original party is completely released from all obligations.
Offer and acceptance is the process by which one party proposes specific terms for a contract and the other party agrees to those exact terms, creating mutual assent. This mutual agreement, also called a meeting of the minds, is an essential element of every valid contract.
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
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