A purchase agreement for a Duluth home includes a financing contingency with a deadline of June 15. The buyer's loan officer informs the buyer on June 12 that the underwriting process will take at least two more weeks. The buyer does not notify the seller or request an extension before June 15. On June 16, the buyer notifies the seller that financing was denied and attempts to cancel the contract. What is the most likely outcome under Minnesota contract practice?
Correct Answer
D) The financing contingency has likely been waived, and the buyer may be in default if they do not proceed
Under Minnesota purchase agreement practice, contingencies must be exercised within the specified deadline. If the buyer fails to cancel or request an extension before the financing contingency deadline of June 15, the contingency is typically deemed waived. By attempting to cancel on June 16—after the deadline—the buyer no longer has the contractual right to cancel under the financing contingency. The buyer may now be in default and at risk of forfeiting their earnest money if they refuse to proceed.
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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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