In a Michigan purchase agreement, a financing contingency primarily protects which party?
Correct Answer
B) The buyer, by allowing contract termination if financing cannot be obtained
A financing contingency in a Michigan purchase agreement is a buyer-protective clause that allows the buyer to void the contract and recover earnest money if the buyer is unable to obtain a mortgage commitment on the specified terms within the contingency period. Without this clause, a buyer who fails to obtain financing could forfeit their earnest money.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Liquidated damages are a predetermined amount of money specified in the contract that the non-breaching party is entitled to receive if the other party breaches. In real estate, the earnest money deposit typically serves as liquidated damages.
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