A purchase and sale agreement in New Haven, Connecticut includes a mortgage contingency stating the buyer must obtain a commitment letter for a 30-year fixed-rate mortgage at no more than 7% interest within 21 days. On day 25, the buyer receives a commitment letter at 6.8%. The seller claims the contingency has expired and the buyer is in default. Which statement best describes the legal situation?
Correct Answer
A) The buyer is in default because the commitment letter was received after the 21-day deadline
The mortgage contingency required the buyer to obtain a commitment letter within 21 days. The buyer received the letter on day 25 — four days after the deadline. The contingency period had already expired, meaning the buyer's obligation to purchase became unconditional after day 21. Failing to timely exercise or satisfy the contingency places the buyer in default, regardless of the favorable interest rate eventually obtained.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
An inspection contingency gives the buyer the right to have the property professionally inspected within a specified time frame and to negotiate repairs or cancel the contract based on the findings.
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