Olivia is purchasing a home in Boulder through a CREC contract. She has a loan contingency with a deadline of Day 21. On Day 19, her lender verbally tells her the loan is approved. On Day 22, the lender sends a written denial due to a last-minute underwriting issue. Olivia wants to terminate and recover her earnest money. Which analysis best describes her situation under the Colorado contract?
Correct Answer
B) Olivia has waived the loan contingency because she did not deliver written notice of a financing problem by Day 21, and the verbal approval indicated the contingency was satisfied
This is a high-difficulty trap question. Under the CREC-approved Contract to Buy and Sell Real Estate, the loan contingency deadline is strict. By Day 21, Olivia had received verbal approval and did not deliver any written notice of a financing problem. Under the CREC contract, buyer inaction by a contingency deadline is treated as a waiver. Olivia's failure to deliver written notice of a financing issue by Day 21 — combined with the apparent satisfaction of the contingency through verbal approval — means the loan contingency was waived. The Day 22 written denial, arriving after the deadline, does not revive a waived contingency. Olivia is now obligated to proceed, and her earnest money may be at risk if she refuses.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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