A buyer's loan application is denied by the lender during an active loan contingency period under the C.A.R. RPA. The buyer promptly notifies the seller and requests cancellation of the contract. Which of the following best describes the buyer's rights regarding the earnest money deposit?
Correct Answer
B) The buyer is entitled to a full refund of the deposit because the loan contingency has not been removed
Under the C.A.R. RPA, a loan contingency protects the buyer's deposit if the buyer is unable to obtain financing on the terms specified in the contract. As long as the contingency has not been removed and the buyer acts in good faith, a loan denial during the active contingency period entitles the buyer to cancel the contract and receive a full refund of the earnest money deposit. The contingency exists precisely to address this risk.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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