A buyer and seller execute a contract in Baltimore County. The contract contains a financing contingency requiring the buyer to obtain a mortgage commitment within 21 days. On day 19, the buyer receives a conditional mortgage commitment requiring the buyer to sell their current home first. The buyer does not notify the seller and does not invoke the financing contingency. On day 25, the buyer informs the seller they cannot proceed because they have not sold their current home. The seller claims the buyer is in breach. Under Maryland contract principles, which of the following best analyzes the situation?
Correct Answer
B) The buyer is likely in breach because a conditional mortgage commitment tied to selling another property may not satisfy the financing contingency, and the buyer failed to timely invoke the contingency
This is a classic Maryland exam trap. A conditional mortgage commitment — one conditioned on the buyer selling their current home — may not satisfy the financing contingency, which typically requires an unconditional mortgage commitment on the terms specified in the contract. The buyer received this conditional commitment on day 19 but failed to notify the seller or invoke the financing contingency within the 21-day window. By failing to act within the contingency period, the buyer waived the financing contingency. Attempting to void the contract on day 25 — after the contingency expired — based on inability to sell their home is likely a breach of contract, and the buyer risks forfeiting their earnest money deposit.
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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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