A Mississippi purchase agreement includes a financing contingency stating that the buyer must obtain a mortgage commitment within 21 days or the contract is void. On day 19, the buyer's lender denies the loan application due to the buyer's low credit score. The buyer notifies the seller in writing on day 20. Which of the following best describes the legal status of the earnest money deposit?
Correct Answer
C) The buyer is entitled to a full refund of the earnest money because the financing contingency was properly exercised within the deadline
When a purchase agreement contains a valid financing contingency and the buyer is unable to obtain financing through no fault of their own, and the buyer properly notifies the seller within the contingency period, the contract becomes void and the buyer is entitled to a full refund of the earnest money. The contingency was properly invoked on day 20, within the 21-day window, so the buyer's deposit is protected.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A breach of contract occurs when one party fails to perform their obligations under the contract without a legal excuse. The non-breaching party is entitled to legal remedies including damages, specific performance, or contract rescission.
Consideration is something of value exchanged between parties to a contract, making the agreement legally binding. It can be money, a promise to act, a promise to refrain from acting, or anything else of value.
Contingencies are conditions written into a real estate contract that must be met before the transaction can close. If a contingency is not satisfied, the buyer can typically cancel the contract without penalty.
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