A buyer in Keene, NH makes an offer on a residential property with a purchase price of $310,000. The offer includes a financing contingency requiring the buyer to obtain mortgage approval within 21 days. The seller accepts the offer. Three weeks later, the buyer's lender denies the loan application because the property's appraised value came in at $290,000. The buyer invokes the financing contingency and seeks to cancel the contract. Which of the following best describes the outcome under New Hampshire contract principles?
Correct Answer
A) The buyer may cancel the contract and is entitled to a return of the earnest money deposit
A properly drafted financing contingency in a New Hampshire purchase contract protects the buyer if they are unable to obtain mortgage approval within the specified period. When a lender denies a loan — including due to an appraisal shortfall that falls below the purchase price — this constitutes a failure to obtain financing, which triggers the contingency. The buyer may properly cancel the contract and is entitled to the return of the earnest money deposit, provided the buyer made a good-faith effort to obtain financing.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A time is of the essence clause in a contract means that all deadlines and dates specified in the agreement are strictly enforceable, and failure to meet them constitutes a material breach.
An appraisal contingency allows the buyer to cancel or renegotiate the contract if the property's appraised value comes in lower than the agreed-upon purchase price. This contingency protects buyers from overpaying.
An assignment of contract transfers one party's rights and obligations under a contract to a third party called the assignee. The original party, known as the assignor, transfers their contractual position to someone who was not originally part of the agreement.
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