Maria is purchasing a single-family home in Providence, Rhode Island. The purchase and sale agreement includes a mortgage contingency clause stating that if Maria cannot obtain financing within 21 days, she may void the contract and recover her earnest money. On day 19, Maria receives a written loan denial. What is the most accurate statement about Maria's rights under Rhode Island law?
Correct Answer
D) Maria may void the contract and recover her earnest money deposit, provided she notifies the seller within the contingency period
Under Rhode Island contract principles, a financing contingency clause is a condition that, if not satisfied, allows the buyer to void the contract and recover the earnest money deposit. Because Maria received a written loan denial on day 19 — within the 21-day contingency window — she has the right to void the contract and demand return of her earnest money, provided she gives timely notice to the seller. This is a standard protective provision in Rhode Island residential purchase agreements.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Equitable title is the buyer's interest in a property after a purchase contract is signed but before closing, giving the buyer the right to acquire legal title in the future. The seller retains legal title until the deed is delivered at closing.
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.
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