Patricia is purchasing a home in Franklin, Tennessee. Her purchase agreement includes a financing contingency stating the contract is contingent upon her obtaining a 30-year conventional mortgage at no more than 6.5% interest within 21 days. On day 19, Patricia receives a loan commitment at 7.0% and decides she does not want to proceed. She notifies the seller that she is voiding the contract under the financing contingency. Which of the following is most accurate?
Correct Answer
A) Patricia may void the contract and recover her earnest money because the loan offered exceeded the rate specified in the contingency
A financing contingency in a Tennessee purchase agreement protects the buyer by allowing them to void the contract and recover their earnest money if they cannot obtain financing on the exact terms specified. The contingency stated a maximum rate of 6.5%, and the offered rate of 7.0% does not meet that condition. Patricia properly invoked the contingency within the 21-day period, so she is entitled to void the contract and have her earnest money returned.
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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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