A buyer in Richmond, Virginia submits an offer on a property that includes a financing contingency specifying a 30-year conventional loan at no more than 6.5% interest. The buyer is approved for a 30-year conventional loan but at 7.0% interest. Under the terms of the contingency, what option does the buyer have?
Correct Answer
A) The buyer may terminate the contract because the interest rate exceeds the rate specified in the contingency
The financing contingency specified a maximum interest rate of 6.5%. Because the buyer was only approved at 7.0%, which exceeds the stated maximum, the contingency condition has not been met. The buyer is therefore entitled to terminate the contract and recover the earnest money, as the financing obtained does not conform to the contractual specifications.
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Related Topics & Key Terms
Key Terms:
Related Concepts
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.
A counteroffer is a response to an original offer that changes one or more terms of the offer, effectively rejecting the original offer and creating a new offer. The party who makes the counteroffer becomes the new offeror.
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