Question

A builder, in selling new homes, requires a non-refundable deposit (which will be used for construction), in addition to the earnest money deposit. This:

a) is not allowed under the law, as deposits must be refundable if contingencies are not met.
b) can be done only if the non-refundable deposit does not exceed the allowable limit.
c) is acceptable as long as the non-refundability is spelled out and agreed to in writing by the buyer.
d) can be done if the funds are held in the trust account for a specified period of time.

Answer 1

A builder can require a non-refundable deposit for new homes construction if this condition is clearly outlined and agreed upon in writing by the home buyer.

Step-by-step explanation:

Regarding the question of whether a builder can require a non-refundable deposit for new homes, the correct answer is: c) is acceptable as long as the non-refundability is spelled out and agreed to in writing by the buyer. Builders and buyers can agree to terms that include non-refundable deposits, which are often used to fund construction costs, as long as the conditions are explicitly stated in a written agreement and understood by all parties involved.

It is important in real estate transactions that both the home buyer and the builder understand the implications of such terms. The deposit is separate from other financial considerations such as earnest money deposits, the down payment, or arrangements which may include an escrow account for payment of home insurance and property taxes.

The role of a mortgage, which is a home loan, generally involves a down payment, typically suggested to be 20% of the home's purchase price. However, lower down payments are possible, usually coupled with the requirement of mortgage insurance to protect lenders. When considering such agreements, buyers should ensure clarity in terms and contract language, including the stipulation of any deposits, whether refundable or not