Wisconsin Real Estate Sales Practice Exam

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If a buyer does not deposit earnest money as specified by the sales contract, what is the status of the sales contract?

Accepted
Breach- voidable
Legal
In negotiation

The correct answer is: Breach- voidable

The sales contract becomes breach-voidable if the buyer does not deposit earnest money as specified in the agreement. Earnest money serves as a show of good faith from the buyer and indicates their serious intention to complete the transaction. The requirement to deposit this money is a vital term of the contract, and failing to do so constitutes a breach of that agreement. When a breach occurs, the non-breaching party (typically the seller, in this case) has the option to void the contract or continue to enforce it, depending on their choice and the specific circumstances. This means the seller can choose to allow the buyer additional time to deposit the earnest money or may seek to terminate the contract altogether, which is why the status is described as voidable. This is distinct from other options provided, which do not accurately capture the implications of failing to fulfill the earnest money requirement within the context of a legally binding real estate sales contract.