A buyer negotiates a 14-day option period with a $750 option fee. On Day 12, the buyer and seller sign an amendment extending the option period by 5 additional days in exchange for an additional $500 option fee. If the buyer terminates on Day 16 of the original contract, how much total in option fees does the seller keep?
Correct Answer
C) $1,250 (both the original and extension fees)
The seller keeps both option fees: the original $750 and the additional $500 extension fee, totaling $1,250. Both option fees are non-refundable consideration for their respective option periods.
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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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