Massachusetts Real Estate License Practice Test

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Get ready for the Massachusetts Real Estate Exam. Study with comprehensive questions and detailed explanations. Enhance your knowledge and confidence to excel in your examination!

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What is the purpose of the mortgage contingency clause?

To ensure immediate payment of a deposit
To allow the buyer time to secure financing
To terminate the sale upon appraisal failure
To validate the purchase price

The correct answer is: To allow the buyer time to secure financing

The purpose of the mortgage contingency clause is to allow the buyer time to secure financing. This clause is a vital component of a real estate purchase agreement because it provides protection for the buyer in case they are unable to obtain a mortgage within a specified timeframe. If the buyer is unable to arrange for financing, the mortgage contingency clause typically allows for the cancellation of the purchase agreement without penalties, thereby safeguarding the buyer’s earnest money deposit. This clause also helps to clarify the conditions under which a buyer is making their offer, indicating that the sale is contingent upon their ability to secure a loan. Therefore, this feature fosters a more secure transaction environment for buyers, giving them the opportunity to conduct their due diligence regarding financing before being fully committed to the purchase.