Marcus, a licensed Arkansas real estate agent, is helping a buyer draft a purchase agreement for a property in Jonesboro. The buyer wants to include a contingency stating that the contract is void if the buyer cannot obtain a 30-year fixed mortgage at or below 7% interest within 21 days. Which of the following statements is most accurate regarding this contingency under Arkansas law?
Correct Answer
B) The contingency is valid and makes the contract voidable by the buyer if the financing condition is not met
Under Arkansas contract law, financing contingencies are valid and commonly used in purchase agreements. If the buyer cannot obtain financing meeting the specified terms within the stated period, the contract becomes voidable by the buyer, allowing them to withdraw without penalty and recover their earnest money. The contingency protects the buyer's interest and is enforceable as written.
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Related Topics & Key Terms
Key Terms:
Related Concepts
The Statute of Frauds is a legal requirement that certain types of contracts must be in writing and signed to be enforceable. In real estate, all contracts for the sale of land or interests in land must be in writing.
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
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