Under the TREC Third Party Financing Addendum, the buyer specifies that they will obtain an FHA loan with a maximum loan-to-value ratio of 96.5%. If the appraised value comes in below the purchase price, what option does the buyer have under the addendum?
Correct Answer
B) The buyer may terminate the contract if they cannot obtain financing approval due to the low appraisal
If the appraisal comes in low and the buyer cannot obtain FHA financing approval at the specified terms, the buyer may terminate the contract under the Third Party Financing Addendum and receive the earnest money back.
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Related Topics & Key Terms
Key Terms:
Related Concepts
An option contract gives one party the exclusive right, but not the obligation, to purchase or lease a property at a specified price within a specified time period. The buyer pays option consideration to keep the option open.
A purchase agreement is a legally binding contract between a buyer and seller that outlines the terms and conditions for the sale of real property. It is also commonly called a sales contract, purchase and sale agreement, or earnest money agreement.
Specific performance is a court-ordered remedy that compels the breaching party to fulfill their obligations under the contract rather than simply paying monetary damages. It is an equitable remedy used when monetary damages would be inadequate.
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