A buyer in Hawaii signs a purchase contract to acquire a single-family home. The contract includes a financing contingency. The buyer's loan application is denied due to insufficient income. The buyer notifies the seller in writing within the contingency period and requests return of the earnest money deposit. Under Hawaii contract principles, what is the most likely outcome?
Correct Answer
B) The buyer is entitled to a refund of the earnest money deposit because the financing contingency was not satisfied
When a purchase contract contains a financing contingency and the buyer's loan is denied, the buyer has the right to cancel the contract and receive a full refund of the earnest money deposit, provided the buyer properly notifies the seller within the contingency period. The contingency protects the buyer from losing their deposit if a specified condition (obtaining financing) is not met.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
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.
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