A purchase contract in New York includes a mortgage contingency clause stating the buyer must obtain a commitment for an 80% LTV conventional loan at 7.5% interest within 30 days. The buyer obtains a commitment for an 80% LTV loan at 8.0% interest. The seller demands the buyer proceed with closing. Which statement is correct?
Correct Answer
C) The buyer can withdraw because the interest rate exceeds the contract specification
When a mortgage contingency specifies particular loan terms including interest rate, the buyer is not obligated to accept financing that does not meet all specified criteria. The 0.5% higher interest rate represents a material change from the contracted terms, allowing the buyer to withdraw.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
Contract termination occurs when a contract is ended or discharged, releasing both parties from their obligations. A contract can be terminated through performance, mutual agreement, operation of law, or breach.
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In a New York residential real estate transaction, buyer Jennifer wants to include a provision allowing her to withdraw from the contract if her attorney disapproves of any terms within 5 business days. This type of contingency is known as:
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