A buyer in Temecula enters into a C.A.R. RPA and removes all contingencies on day 16. On day 22, the buyer's lender unexpectedly denies the loan due to a change in the buyer's employment status. The buyer wants to cancel the transaction. What is the buyer's position under the C.A.R. RPA?
Correct Answer
C) The buyer has no contractual right to cancel because the loan contingency was already removed, and the deposit is at risk
Once the buyer removes all contingencies, including the loan contingency, the buyer has waived the contractual right to cancel based on financing issues. If the buyer cannot close due to loan denial, the buyer is in breach of contract and the deposit is at risk. The seller may be entitled to retain the deposit as liquidated damages if that clause was initialed.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Earnest money is a deposit made by the buyer at the time of the offer or shortly after to demonstrate good faith and serious intent to purchase the property. It is also called a good faith deposit.
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
A financing contingency makes the purchase contract conditional upon the buyer obtaining mortgage approval within a specified time period. If the buyer cannot secure financing, they can cancel the contract and receive their earnest money back.
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