Legal Quiz: Do you know how to handle a Contingent Sale Addendum?
BY: Will Martin, General Counsel
1. True or False: A buyer’s existing property is not under contract at the time of entering into a contract with a seller, so the Contingent Sale Addendum is added. If the buyer’s existing property does not go under contract by the end of the due diligence period in the contract with the seller, either the seller or the buyer may terminate the contract.
2. True or False: A buyer’s existing property is not under contract at the time of entering into a contract with a seller, so the Contingent Sale Addendum is added. A second buyer makes an offer to the seller containing better terms than those accepted from the first buyer. The seller may “kick out” the first buyer if they do not waive the contingency within three days.
3. True or False: If a buyer’s property is under contract at the end of the due diligence period, but that buyer’s property doesn’t close by the settlement date in the contract with the seller, the buyer may terminate the contract and get their earnest money deposit (EMD) back so long as they terminate within three days following the settlement date.
4. True or False: If a buyer’s property is under contract at the end of the due diligence period, but that buyer’s property doesn’t close by the settlement date in the contract with the seller, the buyer would have up to 14 days following the settlement date to close on the seller’s property.
5. A buyer’s existing property is under contract as of the effective date in the contract with the seller, but the contract on the buyer’s property falls through. The buyer notifies the seller that the contract on the buyer’s property has fallen through.
(a) True or False: The buyer may terminate the contract with the seller and get a refund of the EMD.
(b) True or False: The seller may terminate the contract and return the buyer’s EMD.
(c) True or False: The seller may terminate the contract and return the buyer’s EMD whether or not the buyer has put their property under contract with a second buyer.
(d) True or False: If the seller elects to terminate the contract, the seller must in any event also return any due diligence fee the buyer may have paid.
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