Rachel and Brian entered into a Maryland residential purchase contract. The contract included a financing contingency requiring Rachel to obtain a mortgage commitment within 21 days. On day 19, Rachel received a written mortgage denial from her lender due to her debt-to-income ratio. Rachel provided written notice of the denial to Brian and requested return of her $12,000 earnest money deposit. Brian refused, claiming Rachel did not try hard enough to obtain financing. Under Maryland law, what is the most likely outcome?
Correct Answer
B) Rachel is entitled to the deposit refund because she received a written mortgage denial within the contingency period and provided timely notice
Under Maryland contract law, a financing contingency protects the buyer if she is unable to obtain a mortgage commitment within the specified timeframe despite good-faith efforts. Rachel received a written mortgage denial within the 21-day contingency period and provided timely written notice. She properly exercised the contingency and is entitled to a full refund of her $12,000 earnest money deposit. Brian's personal belief that Rachel did not try hard enough does not override the contractual contingency right, absent a specific contract provision requiring multiple lender applications.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
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.
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